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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 Contribution margin per unit before * buying machine 3 2 Contribution margin per unit after * buying machine 3 3 Breakeven point unit before buying * machine 3
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