Holmes Company produces wooden playhouses. When a customer orders a play- house, it is delivered in pieces with detailed instructions on how to put it together. Some customers prefer that Holmes put the playhouse together, and they purchase the playhouse plus the installation package. Holmes then pulls two workers off the production line and sends them to construct the playhouse on site.
Required
1. What two products does Holmes sell? Classify each one as a tangible product or a service.
2. Do you think Holmes would assign costs to each individual product? Why or why not?
3. Describe the opportunity cost of the installation process.