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?