2 3 4 5 6 A B 1 11-26 & 9-22 (Make versus Buy) D E F Vista Company manufactures electronic equipment. It currently purchases the special switches used in each of its products from an outside supplier. The supplier charges Vista $2 per switch. Vista's CEO is considering purchasing either machine A or machine B so the company can manufacture its own switches. Machine A is less expensive to purchase but more expensive to operate, as compared to Machine B. 7 The projected data are as follows: 8 Machine A Machine B 9 Annual fixed costs (depreciation] $135,000 $204,000 10 Variable costs per switch $0.65 $0.30 11 12 External Supplier charges $2.00 per switch 13 14 15 16 1) For each machine, what is the minimum number of switches that Vista must make annually for total costs to equal outside purchase costs? (Breakeven number of units?) 17 Machine A Machine B 18 19 Breakeven units 20 2) If the company decides buy a machine and manufacture the switches, at what volume of units produced will the costs of machine A and machine B be equivalent? 21 22 23 24 25 Breakeven units units 26 3) What is the most profitably alternative for producing 200,000 switches per year? 27 28