Overland Automotive Company is considering on manufacturing a new brand of car. Given the current product and process designs, the cost data are:
The company expects the selling price to be $20,000 and has set a target profit of $5,000.
A supplier told Overland that it could purchase a couple of similar components under a different brand name at a lower price. This would result in cost savings of $2,000 per car. Furthermore, the company found that it could redesign its manufacturing process to cut down on both inspection labor and worker labor, which would result in cost savings of $1,000 per car.

Question

Overland Automotive Company is considering on manufacturing a new brand of car. Given the current product and process designs, the cost data are:
 The company expects the selling price to be $20,000 and has set a target profit of $5,000.
A supplier told Overland that it could purchase a couple of similar components under a different brand name at a lower price. This would result in cost savings of $2,000 per car. Furthermore, the company found that it could redesign its manufacturing process to cut down on both inspection labor and worker labor, which would result in cost savings of $1,000 per car.

Quizplus · Accepted Answer

The Answer of Overland Automotive Company is considering on manufacturing a new brand of car. Given the current product and process designs, the cost data are:
 The company expects the selling price to be $20,000 and has set a target profit of $5,000.
A supplier told Overland that it could purchase a couple of similar components under a different brand name at a lower price. This would result in cost savings of $2,000 per car. Furthermore, the company found that it could redesign its manufacturing process to cut down on both inspection labor and worker labor, which would result in cost savings of $1,000 per car.

Overland Automotive Company Is Considering on Manufacturing a New Brand