Holmes Company produces wooden playhouses. When a customer orders a playhouse, it is delivered in pieces with detailed instructions on how to it together. Some customers prefer that Holmes put the playhouse together. Therefore, these customers purchase the playhouse, as well as pay an additional fee for Holmes to install the play house. Holmes then pulls two workers off the production line and send them to construct the playhouse on site.
1. What two products does Holmes sell? Classify each one as a product or a service.
2. Do you think Holmes assigns costs individually to each products or service? Why or why not?
3. Describe the opportunity cost of the installation process.