Question
A manufacturer currently makes computer racks by screwing them together at a cost of $250 each. They are considering riveting the racks together for $125
A manufacturer currently makes computer racks by screwing them together at a cost of $250 each. They are considering riveting the racks together for $125 each. However, it is estimated that 60% of the riveted racks will be returned within the one-year warranty period for repairs, whereas screwed racks have never been returned within the one-year warranty. The cost of repairing a riveted rack is $35 and the number of racks to be sold in a year is 90,000. State below the yearlycost savingsthat the manufacturer obtains by riveting the racks compared to screwing them.
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