Bramble and Sons $($B&S$)$ is a lumber mill in Virginia that produces rough$-$cut boards and then runs the boards through a sequence of

machines to create green $($uncured$)$ lumber of different dimensions. Then the boards are kiln$-$dried to become building products. B&S

also owns a piece of equipment that applies a coating to some of the boards to produce prefinished flooring. The fixed costs of this

machine are $$153,000$ a year and the variable costs are $$4\mathrm{.}90$ per bundle of planks. Another lumber mill in the same Virginia county is

willing to apply this finish to B&S$\text{'}$s boards for fixed costs of $$83,000$ and variable costs of $$4\mathrm{.}90$ per bundle of planks. Choosing this

option would also require transportation of the boards in both directions$-$to the second lumer mill for coating, and then back to B&S

for packaging and customer delivery. B&S has estimated this transport cost at $$0\mathrm{.}50$ per bundle. If $B$&$S$ chooses to outsource, it could

also sell its coating machine at salvage for a one$-$time sale price of $$146,000.$ Demand for the bundles of planks is expected to be

$130,000$

a$)$ Calculate the annual cost of the current process used at B&S$.$

Annual cost of current process $

b$)$ Calculate the annual cost if the second lumber mill applies the coating.

Annual cost $

c$)$ Find the indifference point for these two alternatives.

Indifference point

bundles of flooring planks

d$)$ How much of a change in demand is needed to justify outsourcing the process? $($Round percentage change to $1$ decimal place, e$.$g$.5\mathrm{.}5\%.)$

Change in demand needed is

units or

by

$\%$

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