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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

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 $315,000 per year, and variable costs would be $590 per boat. Subcontracting would involve a cost per boat of $2,520, and expansion would require an annual fixed cost of $53,000 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 "0" wherever required. Round your answers to the nearest whole number.)

A

___

or

more

B

___ to

to

___

C

___ to

to

___

b. Which alternative would yield the lowest total cost for an expected annual volume of 280 boats?

multiple choice

  • A
  • B
  • C

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