1. Hudson Jewelers' current layout displays jewelry designs from the CAD system on a screen in the front of the store. However, customers have little privacy when designing jewelry there. What are the economic and non-economic advantages and disadvantages of the following options: (a) keep the current layout; (b) move the CAD system into a new private room; and (c) use option (b), buy a second CAD system, and build another private room. Data are provided in the case study.

(a) Keep the Current Layout

Fixed Cost = $5,000 based on CAD square footage to total store square footage.

Variable Cost = $0.20 cents per customer visit ($2,620/year divided by 13,104 visits/year) to update CAD software, insurance, maintenance, and employee CAD training.

(b) Move Current CAD into a Single New Private Design Room

Fixed Cost = $12,000 to build a new CAD design room inside store and move current CAD system to the new room and furnish.

Variable Cost = $0.24 cents per visit ($3,145/13,104) to update CAD software, insurance, maintenance, and employee CAD training, and room stereo speaker and music, fire sprinkler maintenance, and lighting in the design room.