Purchase Solution

Selecting the suitable alternative

Not what you're looking for?

Ask Custom Question

A manufacturer is evaluating options regarding his production equipment. He is trying to decide whether he should refurbish his old equipment for $70,000, make major modifications to the production line for $135,000, or purchase new equipment for $230,000. The product sells for $10, but the variable costs to make the product are expected to vary widely, depending on the decision that is to be made regarding the equipment. If the manufacturer refurbishes, the variable costs will be $7.20 per unit. If he modifies or purchases new equipment, the variable costs are expected to be $5.25 and $4.75, respectively.

(a) Which alternative should the manufacturer choose if it the demand is expected to be between 30,000 and 40,000 units?
(b) What will be the manufacturer's profit if the demand is 38,000 units?

Purchase this Solution
Solution Summary

The solution depicts the steps to select the appropriate alternative depending upon the given demand forecast. What the manufacturer's profit if the demand is 38,00 units is determined.

Solution Preview

A manufacturer is evaluating options regarding his production equipment. He is trying to decide
whether he should refurbish his old equipment for $70,000, make major modifications to the
production line for $135,000, or purchase new equipment for $230,000. The product sells for $10,
but the variable costs to make the product are expected to vary widely, depending on the decision
that is to be made regarding the equipment. If the manufacturer refurbishes, the variable costs will
be $7.20 per unit. If he modifies or purchases new equipment, the variable costs are expected to be
$5.25 and ...

Solution provided by:
Lokesh Jain, MSc
Education
  • BEng (Hons) , Birla Institute of Technology and Science, India
  • MSc (Hons) , Birla Institute of Technology and Science, India
Recent Feedback
  • "Thank you"
  • "Really great step by step solution"
  • "I had tried another service before Brain Mass and they pale in comparison. This was perfect."
  • "Thanks Again! This is totally a great service!"
  • "Thank you so much for your help!"
Purchase this Solution
Free BrainMass Quizzes
Academic Reading and Writing: Critical Thinking

Importance of Critical Thinking

IPOs

This Quiz is compiled of questions that pertain to IPOs (Initial Public Offerings)

Organizational Leadership Quiz

This quiz prepares a person to do well when it comes to studying organizational leadership in their studies.

Introduction to Finance

This quiz test introductory finance topics.

Business Ethics Awareness Strategy

This quiz is designed to assess your current ability for determining the characteristics of ethical behavior. It is essential that leaders, managers, and employees are able to distinguish between positive and negative ethical behavior. The quicker you assess a person's ethical tendency, the awareness empowers you to develop a strategy on how to interact with them.

View More Free Quizzes
Related BrainMass Solutions

  • The strategic management process

    Next step is to find out alternative strategies and selecting the best strategy suitable for the organization. Third step is of Strategic implementation. It involves organizing appropriate resources to implement the strategy.

  • Unit of Analysis and Sample Size

    *Explain the broader implications of selecting the incorrect unit of analysis on the practice to business * How and why the unit of analysis for your proposed quantitative study is suitable for your research question?

  • Health care management industry - Capstone

    Selection of Alternatives: On the basis of the market research, the feasible or best alternative is chosen to select the alternative on the basis of technical, political and social aspect. 4.

  • Case Study: Selecting Patient Escorts

    505626 Case Study: Selecting Patient Escorts 1. Critique each of the alternative approaches suggested for solving the problem of selecting patient escorts. 2. Recommend a procedure for recruiting and hiring patient escorts. 3.

  • Developing a regret matrix for the given scenario

    Alternative A Alternative B Present value of costs incurred for selecting the alternative $10.1 $20.6 prior to knowing which state of nature actually occurs Present value of future revenues if the state

  • How is the base year of an index selected?

    Discussion is suitable for a novice. Your response is 197 words and tells you why the base year is important and some basic rules for selecting a base year. Discussion is suitable for a novice.

  • Decision concepts: theory, principle, model

    With the assistance of the analysis of the situation, we will be able to understand the decision concept applicable in the two situations: // Activity 4 Situation 1 - In this situation, people are selecting that alternative which gives them higher

  • Writing a Hypothesis summary on given scenario

    than hiring more employees Once the hypothesis are formed, the hypothesis need to be tested after selecting a suitable level of significance and an appropriate test statistics based on the type of data (metric or non-metric).

  • Career Improvment

    explains the process of selecting the right position.

View More Related Solutions