FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Question
Vista Company manufactures electronic equipment. It currently purchases the special switches used in each of its products from an outside supplier. The supplier charges Vista $1.80 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:
Machine A | Machine B | |
---|---|---|
Annual fixed costs | $ 141,450 | $ 188,325 |
Variable cost per switch | 0.57 | 0.25 |
Required:
- For each machine, what is the minimum number of switches that Vista must make annually for total costs to equal outside purchase cost?
- What volume level would produce the same total costs regardless of the machine purchased?
- What is the most profitable alternative for producing 155,000 switches per year and what is the total cost of that alternative
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