Assignment:
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.
- Find the range of output for each alternative that would yield the lowest total cost.
- Which alternative would yield the lowest total cost for an expected annual volume of 150 boats?
Your answer must be typed, double-spaced, Times New Roman font (size 12), one-inch margins on all sides, APA format and also include references.