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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 $2.60 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) $ 154,000 $ 223,000 Variable cost per switch 0.85 0.50 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 (.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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