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18 October, 01:37

Oriole Company is unsure of whether to sell its product assembled or unassembled. The unit cost of the unassembled product is $24 and Oriole would sell it for $54. The cost to assemble the product is estimated at $18 per unit and the company believes the market would support a price of $71 on the assembled unit. What decision should Oriole make?

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  1. 18 October, 02:29
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    Sell before assembly, the company will be better off by $1 per unit.

    Explanation:

    Given that,

    Unit cost of the unassembled product = $24

    Selling price of unassembled product = $54

    Estimated cost to assemble the product = $18

    company believes the market would support a price (on the assembled unit) = $71

    Profit from Unassembled product:

    = Selling price - cost

    = $54 - $24

    = $30

    Assembled product cost = $24 + $18

    = $42

    Profit from assembled product:

    = Selling price - cost

    = $71 - $42

    = $29

    Hence, Sell before assembly, the company will be better off by $1 per unit.
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