Peak Reduction Cost = X% * average monthly profit * number of months forecasted. Average monthly profit is average volume (total volume divided by the number of months forecasted) times the product margin, if margin is fairly constant over time.
For example, a 2% reduction in average volume of 150 units per month is an average reduction of 3 units a month. Over a 4 year (48 month) period, we’ll sell about 150 fewer units. With a margin of $2000 per unit, that is a Peak Reduction Cost of about $300K.