Seven Seas Company manufactures 100 luxury yachts per month. Included in each yacht is a compact media center. Seven Seas manufactures the media center in- house, but is considering the possibility of outsourcing that function. At present, the variable cost per unit is $275, and the fixed costs are $39 000 per month. If they outsource, fixed costs could be reduced by half, and the vacant facilities could be rented out to earn $1 000 per month of rental income. At what contract rate would the two alternatives produce the same profit?

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The Answer of Seven Seas Company manufactures 100 luxury yachts per month. Included in each yacht is a compact media center. Seven Seas manufactures the media center in- house, but is considering the possibility of outsourcing that function. At present, the variable cost per unit is $275, and the fixed costs are $39 000 per month. If they outsource, fixed costs could be reduced by half, and the vacant facilities could be rented out to earn $1 000 per month of rental income. At what contract rate would the two alternatives produce the same profit?

Seven Seas Company Manufactures 100 Luxury Yachts Per Month