Vista Company manufactures electronic equipment. It currently purchases from an outside supplier the special switches used in each of its products. The supplier charges Vista $2 per switch. Vista's CEO is considering purchasing either machine A or machine B so the company can manufacture its own switches. The projected data are as follows:

Required
1. For each machine, what is the minimum number of switches that Vista must make annually for total costs to equal outside purchase cost?
2. What volume level would produce the same total costs regardless of the machine purchased?
3. What is the most profitable alternative for producing 200,000 switches per year?
4. Which of the two decision alternatives would you recommend? Why?

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Machine A Machine B $204,000 $135,000 Annual fixed cost Variable cost per switch 0.65