Problem $8-4($Algo$)$

A company that produces pleasure boats has decided to expand one of its lines. Current facilities are insufficient to handle the

increased workload, so the company is considering three alternatives, A $($new location$),$ B $($subcontract$),$ and C $($expand existing

facilities$).$

Alternative A would involve substantial fixed costs but relatively low variable costs: fixed costs would be $$300,000$ per year, and

variable costs would be $$540$ per boat. Subcontracting would involve a cost per boat of $$2,620,$ and expansion would require an

annual fixed cost of $$61,000$ and a variable cost of $$1,080$ per boat.

a$.$ Find the range of output for each alternative that would yield the lowest total cost.

Note: Leave no cells blank $-$ be certain to enter $"O"$ wherever required. Round your answers to the nearest whole number.

b$.$ Which alternative would yield the lowest total cost for an expected annual volume of $170$ boats?

A

B

C

c$.$ What other factors might be considered in choosing between expansion and subcontracting?

Note: You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct

answer and double click the box with the question mark to empty the box for a wrong answer. Any boxes left with a question

mark will be automatically graded as incorrect.

subcontracting costs will be known with greater certainty

subcontracting provides a secondary $($backup$)$ source of supply

expansion offers more control over operations

expansion costs will be known with greater certainty

subcontracting offers more control over operations