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MCS,PHD
Argosy University/ Phoniex University/
Nov-2005 - Oct-2011
Professor
Phoniex University
Oct-2001 - Nov-2016
9-28   Cost Planning; Machine Replacement Calista Company manufactures electronic equipment. It cur- rently purchases the special switches used in each of its products from an outside supplier. The sup- plier charges Calista $2 per switch. Calista’s CEO is considering purchasing either machine X or machine Y so the company can manufacture its own switches. The projected data are as follows:
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|
 Annual fixed cost |
Machine X $135,000 |
Machine Y $204,000 |
|
Variable cost per switch |
0.65 |
0.30 |
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Required
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1.   For each machine, what is the minimum number of switches that Calista must make annually for total costs to equal outside purchase cost?
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2.   What volume level would produce the same total costs regardless of the machine purchased?
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3.   What is the most profitable alternative for producing 200,000 switches per year?
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