Question

3. A company makes tables and is considering to rent a larger warehouse to accommodate a larger inventory, Currently the company wells 200 tables a month, where the average selling price of the table is $95. The variable cost of the table is $30 per month while the fixed costs sum to $1000 per month. If the company has a larger warehouse, which cost $3500 more than its current warehouse, sales are projected to increase by 65 tables. Should the company rent the larger warehouse? Justify your answer using concepts learned in class. Rool - 95% Clx)= ax + 7500 P(x1= 65x - 4,210 Py = 65 x 7,500 di Current warchaus d2 = large www.haux Colant 4,00 poft | Si= 20 Sa: 265 di Ple: 4 qoro dz Pon-550 9727 max net p(si)= ľ s psi) 1. p. EV Cd, ) = 9,000 p + (1-p? 9 Evcd2l= 5,500 + (1-p) 13 (225) Ev Cd,) = EUCdo ) Ev (d, ) = q 000 9,000 = 13,225 7,7250 -4,225 =-7,725P EVC d₂ 2 = 13,221 - 7,7259 p=0.547 Math 446, Spring 2018 il pas. 0.54? then u se for wash I pll> 0 542 then stay with the current warehouse, Exam 1 Review

Answer 1

Salution situation ahee camanyhar smale Cheeent Sales oo Tables hen Ist e tEehouse xceage Peoft Res Tahle Ptal - $19000 $ 6000 $13000 Revenue oo95). vasiahle cast oox) : less Contabution Ered cost Total Peafit $ 4000 less $7000 Too6 Joo $35-RETakle Axesage eofit dasze oheae Snd Stuation where combany tabe by $3500 o ERed aost imcsease then house Aixed cast faSo0+ 4000)s7500 and total the do olo 8aler imceease ay 65 Tohle Sales s 965 Tahle Total RevenueQ66x96) Vasiable ast6SX30) C১nteali& fixed cast Tota eafit $ 25175 7950 $17985 Less $ 7500 lery $9795 Avesage oft. 9795 965 36.69 Conclusion Combany shouldsent the aeze Laehouse tfe tatal Ceofit becawe ar well aveage beopitf frem this as cambang mcsease