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    Business AB makes Keyboards for laptop computers for sales to computer manufacturers (OEMs).

    Account information shows the total cost of producing four potential quantities of keyboard:

    Quantities of keyboard
    50,000 100,000 150,000 200,000
    Materials $ 125,000 $ 250,000 $ 375,000 $ 500,000
    Leasing of Machinery 900,000 900,000 900,000 900,000
    Labor 5,000 10,000 15,000 20,000
    Total costs $1,030,000 $1,160,000 $1,290,000 $1,420,000

    There is market saturation, sales has only identified one potential purchaser as result.

    This customer has numerous alternative options and as a result is only willing to pay $5 per keyboard for an order of 100,000 keyboards.

    Is it better to sign contract under these terms or cease operations?

    a. In the short run, would you sign the contract or shut down? Answer YES or NO and give reason.
    b. In the long run, would you sign the contract or shut down? Answer YES or NO and give reason.

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    https://brainmass.com/economics/contracts/cost-analysis-112663

    Solution Preview

    (a) In a short run it would be better to shut down, since the profit (say, for 100,000 keyboards) is much lower than ...

    Solution Summary

    This job examines cost analysis.

    $2.49

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