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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 $315,000 per year, and variable costs would be $600 per boat. Subcontracting would involve a cost per boat of $2,580, and expansion would require an annual fixed cost of $58,000 and a variable cost of $1,040 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 B с of to to OA B OC more b. Which alternative would yield the lowest total cost for an expected annual volume of 90 boats? C. What other factors might be considered in choosing between expansion and subcontracting? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer. Any boxes left with a question mark will be automatically graded as Incorrect.) subcontracting costs will be known with greater certainty subcontracting provides a secondary (backup) source of supply expansion offers more control over operations expansion costs will be known with greater certainty subcontracting offers more control over operations 27

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 $315,000 per year, and variable costs would be $600 per boat. Subcontracting would involve a cost per boat of $2,580, and expansion would require an annual fixed cost of $58,000 and a variable cost of $1,040 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 B с of to to OA B OC more b. Which alternative would yield the lowest total cost for an expected annual volume of 90 boats? C. What other factors might be considered in choosing between expansion and subcontracting? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer. Any boxes left with a question mark will be automatically graded as Incorrect.) subcontracting costs will be known with greater certainty subcontracting provides a secondary (backup) source of supply expansion offers more control over operations expansion costs will be known with greater certainty subcontracting offers more control over operations 27

Practical Management Science
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section: Chapter Questions
Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...
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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 $315,000 per year, and variable costs would be $600 per boat. Subcontracting would involve a cost per boat of $2,580, and expansion would require an annual fixed cost of $58,000 and a variable cost of $1,040 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 B C or to OA OB OC to more b. Which alternative would yield the lowest total cost for an expected annual volume of 90 boats? c. What other factors might be considered in choosing between expansion and subcontracting? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer. Any boxes left with a question mark will be automatically graded as Incorrect.) subcontracting costs will be known with greater certainty subcontracting provides a secondary (backup) source of supply expansion offers more control over operations expansion costs will be known with greater certainty subcontracting offers more control over operations s
Transcribed Image Text: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 $315,000 per year, and variable costs would be $600 per boat. Subcontracting would involve a cost per boat of $2,580, and expansion would require an annual fixed cost of $58,000 and a variable cost of $1,040 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 B C or to OA OB OC to more b. Which alternative would yield the lowest total cost for an expected annual volume of 90 boats? c. What other factors might be considered in choosing between expansion and subcontracting? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer. Any boxes left with a question mark will be automatically graded as Incorrect.) subcontracting costs will be known with greater certainty subcontracting provides a secondary (backup) source of supply expansion offers more control over operations expansion costs will be known with greater certainty subcontracting offers more control over operations s
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