Chapter 7 Problem 7.10 (modified) Gardens, Inc., prewashes, shreds, and distributes a variety of salad mixes in 2-pound bags. Doug Voss, Operations VP, is considering a new Hi-Speed shredder to replace the old machine, referred to in the shop as "Clunker." Hi-Speed will have a fixed cost of $85,000 per month and a variable cost of $1.25 per bag. Clunker has a fixed cost of only $44,000 per month, but a variable cost of $1.75. Selling price is $2.50 per bag. SHOW EXCEL FORMULAS ON HOW TO DO IT

Graph the three total cost lines on the same chart. (use the tables below)

- What is the crossover point (point of indifference) for refurbishing the old equipment and making major modifications? (Calculate by hand or all in Excel?)

- For what range in demand would making major modifications be the best option?

- Which alternative should Ski Boards, Inc. choose if it thinks it can sell more than 3,000 boards? (Solve with graph or total cost data)

- Which alternative should the firm use if it thinks the market for boards is between 1,000 and 2,000 boards? (Solve with graph or total cost data)