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Exam 1

Exam 1 - Question 2 Part D Apple Inc has made a rare...

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Question 2 Part D Apple Inc. has made a rare fashion miscalculation: they have produced 8,000 neon green iPods, but have sold almost none. An iPod (of any color) costs $125 to manufacture, and sells for a price of $199. Apple is considering two courses of action. Apple could sell the iPods to a children's hospital, which would like to provide them to children to use while they are staying in the hospital. Alternatively, Apple could disassemble the neon green iPods, discard the cases, and reuse some of the parts to make iPods of more popular colors. The parts that are reusable would otherwise cost Apple $60 to acquire. However, it costs $20 worth of labor to disassemble the neon green iPods in order to extract the reusable parts. What is the lowest price at which Apple should be willing to sell the iPods to the hospital? (Note: Consider this a business decision. Ignore any charitable motivation. You may also assume that the hospital would not buy iPods at the regular price.) The best option is for Apple Inc to sell the iPods to children hospital. Apple Inc would be
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