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A yatch company has developed a new cabin cruiser which they earmarked for the medium to large board market
A yatch company has developed a new cabin cruiser which they earmarked for the
medium to large board market. A market analysis has a 30% probability of annual sales
being 5000 boats, and a 40% probability of 4000 annual sales. This company can go into
limited production while available costs are sh.10,000 per boat and a fixed cost and
sh.800,000 annually. Alternatively they can go into full production where variable cost
are sh.9000 per boat and fixed costs are sh.5,000,000 annually, if the new boat is to be
sold for shs.11,000 should the company go to limited or full scale production when the
objective is to maximized expected profits (use a tree diagram)
Expert Solution
Answer:
The Company should go in for Limited Scale Production since it has high annual expected profits(Shs. 3200000)
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