A swim club is designing a new pool to replace its old pool. The new pool would need to last for 10 years since the club is planning on relocating after 10 years. A concrete shell would cost $100,000 and last for all 10 years. Another option is to install a vinyl liner that would cost only $75,000 to install. However, the vinyl is not guaranteed to last for all 10 years, and it has a 33% chance of breaking down. Repair of the vinyl would cost $40,000 and would extend the life of the vinyl liner to the 10-year mark. If both options are acceptable to the swim club, which one minimizes their cost?

concrete shell pool = $100,000 (100% guaranteed to last 10 years)
vinyl liner = ($75,000 x 67% chance of lasting 10 years) + ($115,000 x 33% chance of needing repairs) = $50,250 + $37,950 = $88,200

The expected costs of the vinyl liner option are lower than the costs of paying for a concrete shell. There is a 67% chance that the vinyl liner will cost less money and only 33% chance that it will cost more money.

swatiupadhyay714 swatiupadhyay714 · Answer 2 · 2021-12-09T08:42:27+01:00

The process of reducing expenditures on unnecessary or inefficient processes is known as cost minimization.

These changes in spending might be minor or major, but any cost reduction will almost certainly have a significant impact on maximizing profits.

The substance vinyl liner minimizes its cost.

Expected costs:

Concrete shell pool = $100,000 (100% guaranteed to last 10 years)

Vinyl liner = ([tex]\$75,000 \times 67\%[/tex] chance of lasting 10 years) + ([tex]\$115,000 \times 33\%[/tex] chance of needing repairs) = $50,250 + $37,950 = $88,200

The plastic lining alternative is expected to be less expensive than paying for a concrete shell. The plastic lining has a 67 percent chance of spending less money and just a 33 percent chance of costing more money.

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https://brainly.com/question/25703194