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7.11 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 unit. Each unit is expected to sell for $28. a) What is the crossover point (point of indifference) in units for per 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?

7.11 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 unit. Each unit is expected to sell for $28. a) What is the crossover point (point of indifference) in units for per 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?

Practical Management Science
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
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7.11 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?
Transcribed Image Text:7.11 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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