Suppose that ikea, the Swedish retailer, is developing a new chair targeted to sell for less than $100 and it is considering the two production alternatives that follow. Rank the alternatives, assuming that the company's minimum desired profit is 30 percent over total production costs.
Alternative Alternative.
- Direct material cost $35 $20
- Direct labor cost 1hr at $12 per hr 2hr at $8 per hr
- Overhead cost 200% of direct $2 per dollar of direct
- Labor cost materials