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Perform an analysis for the Ocobee River Rafting Company to determine which alternative would be best for different levels of demand. Indicate which alternative should be selected if demand is approximately 1,000 rafts and how much profit the company would make.

They considered starting a new enterprise, the Ocobee River Rafting Company, to sell rubber rafts at the river. Cost estimates Initial investment = $3,000 to rent a small parcel of land next to the river on which to make and sell the rafts; to purchase a tent to operate out of; and to buy some small equipment such as air pumps and a rope cutter. Estimated labour and material cost per raf = about $12, including the purchase and shipping costs for the rubber tubes and rope. Selling price of the rafs (plan) = $20 a piece, which they think is about the maximum price students will pay for a preassembled raft

Rafing company in North Carolina offers to the Ocobee River Rafing Company They would be willing to: Supply rafts for an initial fixed fee of $9,000 plus $8 per raft, including shipping. The rafts would already be inflated and assembled (The Ocobee River Rafting Company would still have to rent the parcel of riverside land and tent for $1,000.) This alternative appealed to Vicki, Penny, and Darryl because it would reduce the amount of time they would have to work pumping up the tubes and putting the rafts together, and it would increase time for their schoolwork. Although the students prefer the alternative of purchasing the rafts from the North Carolina Company, they are concerned about the large initial cost and worried about whether they will lose money. Of course, Vicki, Penny, and Darryl realize that their profit, if any, will be determined by how many rafts they sell. As such, they believe that they first need to determine how many rafts they must sell with each alternative in order to make a profit and which alternative would be best given different levels of demand. Furthermore, Penny has conducted a brief sample survey.

Alternative 1 TFC

VC (cost per)

Alternative 2

3,000,

10,000

Investment , 3,000

Supply fee, 9,000 Rent, 1,000 8$

12 $ Estimated labour and material cost per raft

Per raft

Demand

1,000

1,000

TVC

12,000

8,000

TC

15,000

18,000

Total Revenue: Selling Price Sales Total Sale

20 1,000 20,000

Total Profit: ALTERNATIVE 1 Total Revenue – Total Cost = 20,000 – 15,000 = 5,000

ALTERNATIVE 2 Total Revenue – Total Cost = 20,000 – 18,000 = 3,000...