Question

A company that produces pleasure boats has decided to expand one of its lines. Current facilities are insufficient to handle the increased workload, so the company is considering three alternatives, A (new location), B (subcontract), and C (expand existing facilities) Alternative A would involve substantial fixed costs but relatively low variable costs: fixed costs would be $305,000 per year, and variable costs would be $550 per boat. Subcontracting would involve a cost per boat of $2,520, and expansion would require an annual fixed cost of $59,000 and a variable cost of $1,020 per boat. a. Find the range of output for each alternative that would yield the lowest total cost. (Leave no cells blank - be certain to enter "O" wherever required. Round your answers to the nearest whole number) or more to b. Which alternative would yield the lowest total cost for an expected annual volume of 200 boats?

Answer 1

Fox A ギ fixed cost (f): $30 5,000 Pe'ycaY YC Set up euation- boats let x= no (empare case A arnd Casa B $ 3o5 , ooo + 550 × 2520 305, ooo 2520 ← 550

(2 15 . 82. Hexe we Cemme Case A amd Case C r) 수 305, ooo 523 . 523