Question #1

Question #2

Waterways is considering the replacement of an antiquated machine that has been slowing down production because of breakdowns and added maintenance. The operations manager estimates that this machine still has 2 more years of possible use. The machine produces an average of 60 units per day at a cost of $6.70 per unit, whereas other similar machines are producing twice that much. The units sell for $8.70. Sales are equal to production on these units, and production runs for 260 days each year. The replacement machine would cost $65,600 and have a 2-year life. Given the information above, what are the consequences of Waterways replacing the machine that is slowing down production because of breakdowns? net loss should Replacing the machine will result in a of $ Waterways keep the old machine. Waterways has discovered that a small fitting it now manufactures at a cost of $1.00 per unit could be bought elsewhere for $0.82 per unit. Waterways has fixed costs of $0.20 per unit that cannot be eliminated by buying this unit. Waterways needs 418,000 of these units each year. If Waterways decides to buy rather than produce the small fitting, it can devote the machinery and labor to making a timing unit it now buys from another company. Waterways uses approximately 400 of these units each year. The cost of the unit is $12.89. To aid in the production of this unit, Waterways would need to purchase a new machine at a cost of $2,349, and the cost of producing the units would be $9.60 a unit. Your answer is partially correct. Try again. Without considering the possibility of making the timing unit, evaluate whether Waterways should buy or continue to make the small fitting. X make 450000 The company should the fitting. Incremental cost / (savings) will be $ LINK TO TEXT LINK TO TEXT LINK TO TEXT x Your answer is incorrect. Try again. What is Waterways' opportunity cost if it chooses to buy the small fitting and start manufacturing the timing unit? x The opportunity cost is 1536