Vista Company manufactures electronic equipment. In 2021, it purchased from an outside supplier the special switches used in each of its products. The supplier charged Vista $2.70 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 2022 to purchase machine A based on the following data: Annual fixed cost (depreciation) Variable cost per switch Machine A $ 142,000 0.70 Machine B $ 211,000 0.30 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 (.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?
Vista Company manufactures electronic equipment. In 2021, it purchased from an outside supplier the special switches used in each of its products. The supplier charged Vista $2.70 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 2022 to purchase machine A based on the following data: Annual fixed cost (depreciation) Variable cost per switch Machine A $ 142,000 0.70 Machine B $ 211,000 0.30 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 (.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?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
4
![Vista Company manufactures electronic equipment. In 2021, it purchased from an outside supplier the special switches used in each of
its products. The supplier charged Vista $2.70 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 2022 to purchase machine A,
based on the following data:
Annual fixed cost (depreciation)
Variable cost per switch
Machine A
$ 142,000
0.70
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 (.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?
Complete this question by entering your answers in the tabs below.
units/year
Required 1 Required 2 Required 3
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)? (Do not round intermediate calculations. Round your final answer up to the nearest whole
number.)
Indifference point
Required 1
Machine B
$ 211,000
0.30
OUse machine A to make the switches.
OPurchase the switches from the external supplier.
Complete this question by entering your answers in the tabs below.
Required 1
Required 2 Required 3
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?
< Required 1
Required 2 >
< Required 2
Required 3 >
Complete this question by entering your answers in the tabs below.
Required 1
Required 2
Required 3
Assume that machine A has already been purchased. At what annual volume level should Vista consider replacing machine A
with machine B? (Do not round intermediate calculations. Round your final answer up to the nearest whole number.)
Volume level
units (per year)
Required 3 >](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F3ff6e6fd-adc9-4093-b759-2557b1c5934b%2Fa55a1c5c-e121-419c-9749-f0dc3a8d917e%2Fhgnf196_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Vista Company manufactures electronic equipment. In 2021, it purchased from an outside supplier the special switches used in each of
its products. The supplier charged Vista $2.70 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 2022 to purchase machine A,
based on the following data:
Annual fixed cost (depreciation)
Variable cost per switch
Machine A
$ 142,000
0.70
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 (.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?
Complete this question by entering your answers in the tabs below.
units/year
Required 1 Required 2 Required 3
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)? (Do not round intermediate calculations. Round your final answer up to the nearest whole
number.)
Indifference point
Required 1
Machine B
$ 211,000
0.30
OUse machine A to make the switches.
OPurchase the switches from the external supplier.
Complete this question by entering your answers in the tabs below.
Required 1
Required 2 Required 3
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?
< Required 1
Required 2 >
< Required 2
Required 3 >
Complete this question by entering your answers in the tabs below.
Required 1
Required 2
Required 3
Assume that machine A has already been purchased. At what annual volume level should Vista consider replacing machine A
with machine B? (Do not round intermediate calculations. Round your final answer up to the nearest whole number.)
Volume level
units (per year)
Required 3 >
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