ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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Question 1
You are hired as a consultant for Skater Boys Incorporated, a firm with over five years
experience in the skate board industry.Due to changing demand and a move to
environmentally friendly products, the company wishes to enter the market with a new eco-
friendly finish on its skate boards. Based on your analysis of the company's operations,
Skater Boys Inc has three main choices. After careful inspection of their current equipment
the company can spend $800 in refurbishment of their old equipment or make major
modifications to its operations at a cost of $1100. If these options are not taken, they can also
choose to purchase new equipment at a cost of $1800.
If the firm chooses to refurbish their existing equipment, materials and labour per skate board
will be $1.10 while a material and labour cost of $0.70 per board is associated with the major
modification choice. If however the company chooses to buy new equipment, the associated
variable cost is estimated to be $0.40 per board.
You are required to do the following analysis
a. Use one diagram to show the cost associated with each decision.
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Transcribed Image Text:Question 1 You are hired as a consultant for Skater Boys Incorporated, a firm with over five years experience in the skate board industry.Due to changing demand and a move to environmentally friendly products, the company wishes to enter the market with a new eco- friendly finish on its skate boards. Based on your analysis of the company's operations, Skater Boys Inc has three main choices. After careful inspection of their current equipment the company can spend $800 in refurbishment of their old equipment or make major modifications to its operations at a cost of $1100. If these options are not taken, they can also choose to purchase new equipment at a cost of $1800. If the firm chooses to refurbish their existing equipment, materials and labour per skate board will be $1.10 while a material and labour cost of $0.70 per board is associated with the major modification choice. If however the company chooses to buy new equipment, the associated variable cost is estimated to be $0.40 per board. You are required to do the following analysis a. Use one diagram to show the cost associated with each decision.
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