Ski Boards, INC., wants to enter the market quickly with a new finish on its ski

Question

Ski Boards, INC., wants to enter the market quickly with a new finish on its ski boards. It has three choices: (a) refurbish the old equipment at a cost of $800, (b) make major modifications at a cost of $1,100, or (c) purchase new equipment at a net cost of $1,800. If the firm chooses to refurbish the equipment, materials and labor will be $1.10 per board. If it chooses to make modifications, materials and labor will be $0.70 per board. If it buys new equipment, variable costs are estimated to be$.40 per board.

Which alternative should Ski Boards, Inc., should choose if it thinks it can sell 700 boards?

Explanation / Answer

refurbish net cost = 800 + 1.1 * 700 = 1570

major modifications costs = 1100 + 0.7 * 700 = 1590

purchase new equipment = 1800 + 0.4 * 700 = 2080

Hence refurbishing option should be chosen

Related Questions

Navigate

• Browse (All)
• Browse S
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.