Solution-At what annual volume level should vista consider

At what annual volume level should vista consider

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Reference no: EM132744292

Problem - Vista Company manufactures electronic equipment. In 2018, it purchased from an outside supplier the special switches used in each of its products. The supplier charged Vista $2.2 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 2019 to purchase machine A, based on the following data:

	Machine A	Machine B
Annual fixed cost (depreciation)	$145,000	$206,000
Variable cost per switch	0.75	0.40

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?

Reference no: EM132744292

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At what annual volume level should vista consider

Reference no: EM132744292

Reference no: EM132744292

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