A company that produces pleasure boats has decided to expand one of its lines. C

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 $250,000 per year, and variable costs would be $500 per boat. Subcontracting would involve a cost per boat of $2,500, and expansion would require an annual fixed cost of $50,000 and a variable cost of $1,000 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 __________

C._________ To ___________

Explanation / Answer

a. B:0to33; C:34to40; A:400+

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