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ABC Company has two machines, each machine working separately, but theyproduce the same parts. The variable and fixed costs of those two machines aresummarized in
ABC Company has two machines, each machine working separately, but theyproduce the same parts. The variable and fixed costs of those two machines aresummarized in the following table. Machine 1 (M1) cycle time is 1 part/ 3hours, and Machine 2 (M2) cycle time is 1 part/ 1 hour. The manager wants to invest in a new machine (M3), the new machine'sfixed cost is $15,000, the variable cost is $400 / 10 parts, and it needs two operators its cycle time is one part / 1 hour. If he decided to buy the new machine, thepart price would increase by 30%. Cost Fixed Cost Variable Cost (per 10 parts) Number of operators (50/ hour) Part Price M1 M2 $20,000 $10,000 $500 $300 2 1 $500 1. 2. 3. Calculate the following for both situations (before buying the new machine and after buying machine 3): Contribution margin per unit? Breakeven point unit? How many parts he need to sell in order to get $8,000 operating income? Based on your answer, which option should he choose? 4
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