Question

Kevin Shirley, CEO of Shirley Construction builds condos in a booming retirement community in Florida. Although sales have slowed because of a national recession, it now looks as if the recession is about to end. Mr. Shirley wants to be ready with material, labor, and foremen to meet the demand for condos. Last year, Kevin built and sold 30 condos. With the recent recession ending, Mr. Shirley thinks that his sales will increase to 40 units for the current year. The going market price for these condos (which Kevin and his numerous competitors have charged) has been $225,000. In addition, Shirley Contruction's marginal cost of building this model averages $155,000. a. Based on these facts, recommend a course of action for Kevin. b. Suppose that the economic boom raises the cost of labor and raw materials, so that the additional cost of a condo rises to $180,000. What is Kevin's most profitable course of action? Explain

Answer 1