Answered step by step
Verified Expert Solution
Question
1 Approved Answer
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 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 $2.10 per switch. As an alternative, Vista's 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) $ 133,000 $ 205,000 Variable cost per switch 0.70 0.35 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 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? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 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)? (Do not round intermediate calculations. Round your final answer up to the nearest whole number.) Show less A Indifference point units/year Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 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? Use machine A to make the switches. Purchase the switches from the external supplier. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Assume that machine A has already been purchased. At what annual volume level should Vista consider replacing machine A with machine B? (Do not round intermediate calculations. Round your final answer up to the nearest whole number.) Volume level units (per year)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started