3-14 Cost of Prediction Errors A company set a price for its product at $20 per unit. Predicted variable costs were $14 per unit. Expected sales were 100,000 units. Fixed costs for the year were expected to be $400,000.

Compute the cost of the prediction error if: 1. All of the forecasts were accurate, except that the actual variable costs were $15 per unit. (Given a $15 variable cost, the $20 price would not be changed.) 2. Actual variable costs were $15 per unit. Sales could have been 110,000 units if enough stock were available. However, only 100,000 units were acquired and sold.