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Sheffield Corp. is unsure of whether to sell its product assembled or unassembled. The unit cost of the unassembled product is $24 and Sheffield would sell it for $52. The cost to assemble the product
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Sheffield Corp. is unsure of whether to sell its product assembled or unassembled. The unit cost of the unassembled product is $24 and Sheffield would sell it for $52. The cost to assemble the product is estimated at $15 per unit and the company believes the market would support a price of $64 on the assembled unit. What decision should Sheffield make

User Matt Woodard
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5 votes

Answer:

Sell before assembly, the company will be better off by $3 per unit

Step-by-step explanation:

the aim of a firm is to maximise profit. The decision the firm would make would be based on the decision that yields the higher profit

Profit = revenue - cost

Profit that would be earned from selling the unassembled unit = $52 - $24 = $28

Profit that would be earned from selling the assembled unit = $64 - ($15 + $24) = 25

The profit from selling the unassembled product is greater than the profit from selling the assembled product by $3. The firm would prefer to sell the unassembled unit

User Curly
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