Question

You are the COO at PineApple, a company that produces notebook computers for business people. The company has just developed a new model - Pbook. For production of Pbook, the company is considering production at all or some of the following plants.

As the COO, you need to find out how to allocate the production.

(i)  What are the marginal costs of plant 1, plant 2, and plant 3?

(ii) How would you allocate the production of Pbook? What % of total outputs should be produced at plant 1, plant 2, and plant 3?

(iii) One of your subordinates argues that either plant 2 or plant 3 does not need to be used as they have exactly same cost structure. Do you agree? Explain carefully.

(iv) Your marketing manager reported that that the estimated market price of the new product is P = $2,000 how many units are you going to produce in total? How would you allocate the production to each plant (how many units each factory should produce)?