Nagle Electric, Inc., of Lincoln, Nebraska, mustreplace a robotic Mig welder and is evaluating two alternatives.Machine A has a fixed cost for the first year of $75,000 and avariable cost of $16, with a capacity of 18,000 units per year.Machine B is slower, with a speed of one-half of A’s, but the fixedcost is only $60,000. The variable cost will be higher, at $20 perunit. Each unit is expected to sell for $28.a) What is the crossover point (point of indifference) in units forthe two machines? b) What is the range of units for which machine A is prefer-able? c) What is the range of units for which machine B is preferable?
Nagle Electric, Inc., of Lincoln, Nebraska, mustreplace a robotic Mig welder and is evaluating two alternatives.Machine A has a fixed cost for the first year of $75,000 and avariable cost of $16, with a capacity of 18,000 units per year.Machine B is slower, with a speed of one-half of A’s, but the fixedcost is only $60,000. The variable cost will be higher, at $20 perunit. Each unit is expected to sell for $28.a) What is the crossover point (point of indifference) in units forthe two machines? b) What is the range of units for which machine A is prefer-able? c) What is the range of units for which machine B is preferable?
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter11: Differential Analysis And Product Pricing
Section: Chapter Questions
Problem 3CMA: Aril Industries is a multiproduct company that currently manufactures 30,000 units of Part 730 each...
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Question
Nagle Electric, Inc., of Lincoln, Nebraska, must
replace a robotic Mig welder and is evaluating two alternatives.
Machine A has a fixed cost for the first year of $75,000 and a
variable cost of $16, with a capacity of 18,000 units per year.
Machine B is slower, with a speed of one-half of A’s, but the fixed
cost is only $60,000. The variable cost will be higher, at $20 per
unit. Each unit is expected to sell for $28.
a) What is the crossover point (point of indifference) in units for
the two machines?
b) What is the range of units for which machine A is prefer-
able?
c) What is the range of units for which machine B is preferable?
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