Question

NF Toy Company is unsure of whether to sell its product assembled or unassembled. The unit cost of the unassembled product is $24 and NF Toy would sell it for $52. The cost to assemble the product is estimated at $17 per unit and the company believes the market would support a price of $68 on the assembled unit. What decision should NF Toy make

Answer 1

The NF Toy Company should sell its product assembled

Step-by-step explanation:

The options available to NF Toy Company are;

The unit cost of the unassembled product, C₁ = $24

The price at which NF Toy would sell the unassembled product, R₁ = $52

The unit cost of the assembled product, C₂ = $17

The price NF Toy believes the market would support for the assembled toy, R₂ = $68.00

Profit, P = Revenue - Cost

The profit NF Toy Company would make, by selling a unit of unassembled toy, P₁, is given as follows

P₁ = $51 - $24 = $27

The profit NF Toy Company would make, by selling a unit of assembled toy, P₂ = $68 - $ 17 = $51

To maximize profit, given that the profit made by NF Toy Company by the unassembled toy, P₁ = $27 is less than the profit made when the assembled toy is sold, P₂ = $51, the NF Toy Company should sell its product assembled.