Adding a line for producing a special onion flavored

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Reference no: EM13760724

Keisler Enterprise is considering the option of adding a line for producing a special onion flavored tofu over the next year. In fact, there are 2 ways to do this. The first way is using spare capacity on an existing line and modifying the process by hand. The second is to set up a brand new line. It would cost 5,000$ to set up the existing line after which each pound of onion toddu would cost $1,000 to produce, up to maximum 1,500 units. It would cost 10,000$ to set up a brand new line after which each pound of onion tofu would cost $0.50 (up to maximum of 2,500 units) to produce up to the point of sale. The onion tofu will be sold at $2. if the onion tofu is unpopular , it will only sell 8,000 units. if it is somewhat popular it will sell 15,000 units. If its very popular it will sell 24,000 units. There is a 10% chance the product will be very popular, a 50% chance it will be somewhat popular and a 40 % chance it will be unpopular. Should KE add no line at all, should they use spare capacity or should they set up a brand new line?

Reference no: EM13760724

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