Ski Boards, Inc., wants to enter the market quickly with a new finish on its ski

Question

Ski Boards, Inc., wants to enter the market quickly with a new finish on its ski boards. It has two choices: (A) make major modifications at a fixed cost of $26,000, or (B) purchase new equipment at a net fixed cost of $63,000. If the firm chooses to make modifications, variable materials and labor will be $27.0 per board. If it buys new equipment, variable costs are estimated to be $17.5 per board.

What is the minimum sales quantity that would justify the purchase of new equipment? (Specify as a whole number by rounding)

Explanation / Answer

63000 + 17.5x = 26000 + 27x

9.5x = 37000

x = 3894.74

Hence 3,895 units

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