4. Several graduate students at ABC University formed a company called the ABCRiver Rafting Company to produce rubber rafts. The initial investment in plant andequipment is estimated to be $2,000. Labor and material cost is approximately $5per raft. (a) If the rafts can be sold at a price of $10 each, what volume of demandwould be necessary to break-even? (b) The students believe demand for theirproduct will far exceed the break-even point in (a). They are now contemplatinga larger initial investment of $10,000 for more-automated equipment that wouldreduce the variable cost of manufacture to $2 per raft, what is the break-even forthis new process? (c) Compare the process described in (a) with the processproposed in (b). For what volume of demand should each process be chosen?

Initial investment $2,000 Labor and material cost $5 per raft

Answered: Several graduate students at ABC…

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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