Nagle Electric, Inc., of Lincoln, Nebraska, must replace a robotic MIG welder and is evaluating two alternatives.

Question:

Nagle Electric, Inc., of Lincoln, Nebraska, must replace a robotic MIG welder and is evaluating two alternatives. Machine A has a fixed cost for the first year of $75,000 and a variable cost of

$16, with a capacity of 18,000 units per year. Machine B is slower, with a speed of one-half of A’s, but the fixed cost is only $60,000. The variable cost will be higher, at $20 per unit. Each unit is expected to sell for $28.

a) What is the crossover point (point of indifference) in units for the two machines?

b) What is the range of units for which machine A is preferable?

c) What is the range of units for which machine B is preferable? LOP4

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