Facility Comparison at SportsExchange SportsExchange is a regional refurbisher of sporting goods equipment. It specializes in upgrad- ing football equipment that it receives from high schools and colleges. Processes used by SportsExchange include sewing pants and jerseys, replacing pads, repairing and painting hel- mets, and replacing laces, snaps, and elastic in pants. The most expensive process for SportsExchange is painting helmets. Regulations that con- trol worker safety and environmental emissions mandate a paint room that manages fumes effectively. In order to continue in its lucrative business, SportsExchange is required to invest in a new state-of-the-art painting facility. SportsExchange has identified three manufacturers of turnkey spray booths. The fixed and variable costs associated with each of the three alternatives are presented in Table 1 below: TABLE 1: COSTS ASSOCIATED WITH SPORTSEXCHANGES THREE

Alternative Fixed cost Variable cost A: Enviro-Spray $500,000 $0.148

B: Spray Center $207,500 $ 1.321

C: Crystal Coat $265,000 $ 0.910

Analysis SportsExchange believes it will need to refinish 200,000 helmets. What is the total cost for each of the alternatives for refinishing that quantity of helmets? Which alternative appears to be the best choice (i.e., lowest total cost)? What alternative appears to the best choice if quantity to refinish increases to 320,000 helmets? The cost accountants at SportsExchange may have made an error in calculating the fixed costs associated with the Spray Center alternative. They now believe that the fixed costs for the Spray Center alternative should be $150,000. If SportsExchange expects to refinish 200,000 helmets, which alternative looks the best now? What happens to the relative attractiveness of the Crystal Coat alternative as Spray Centers fixed costs decrease to $150,000? In addition, the cost accountants have revealed that their estimate for Crystal Coats vari- able cost may be too low. However, they dont know how by much they are off and would like to know how sensitive Crystal Coat is to changes in variable costs, specifically increases in variable costs. Give the cost accountants some assistance here by increasing Crystal Coats variable costs and describe the changes that occur relative to the other alternatives.