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| Teaching Since: | May 2017 |
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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:
|
Annual fixed cost |
Machine X $135,000 |
Machine Y $204,000 |
|
Variable cost per switch |
0.65 |
0.30 |
Required
1. For each machine, what is the minimum number of switches that Calista 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?
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