Question
Item3 Time Remaining 3 hours 14 minutes 19 seconds 03:14:19 Item 3 Time Remaining 3 hours 14 minutes 19 seconds 03:14:19 Vista Company manufactures electronic
Item3
Time Remaining 3 hours 14 minutes 19 seconds
03:14:19
Item 3
Time Remaining 3 hours 14 minutes 19 seconds
03:14:19
Vista Company manufactures electronic equipment. In 2021, it purchased from an outside supplier the special switches used in each of its products. The supplier charged Vista $2.70 per switch. As an alternative, Vistas CEO considered purchasing either machine A or machine B so the company could manufacture its own switches. The CEO decided at the beginning of 2022 to purchase machine A, based on the following data:
Machine A | Machine B | |
---|---|---|
Annual fixed cost (depreciation) | $ 142,000 | $ 211,000 |
Variable cost per switch | 0.70 | 0.30 |
Required:
1. Assume that machine A has not yet been purchased. What is the annual volume that would make the company indifferent between the two decision alternatives (i.e., purchasing and then using machine A to make the switches versus purchasing the switches from the outside vendor)?
2. Assume that machine A has already been purchased. Is it preferable to use machine A to make the switches or to purchase the switches from the external supplier?
3. Assume that machine A has already been purchased. At what annual volume level should Vista consider replacing machine A with machine B?
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