Guadalupe Electric, Inc. 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?