Question: ABC Company has two machines each machine working separately, but they produce the same parts. The variable and fixed costs of those two machines

ABC Company has two machines each machine working separately, but they produce

ABC Company has two machines each machine working separately, but they produce the same parts. The variable and fixed costs of those two machines are summarized in the following Table. Machine 1 (M1) cycle time is 1 part/ 2 hours, and Machine 2 (M2) cycle time is 1 part/0.6 hour. Cost M1 M2 Fixed Cost $10,000 $5,000 Variable Cost (per 10 parts) $250 $150 Number of operators (50/hour) 1 2 Part Price $450 The manager wants to invest in new machine (M3), the new machine fixed cost is $1.700, variable cost is $320/5 parts, and it need 2 operators, its cycle time is 1 parts/ 1 hour. If he decided to buy the new machine, the part price will increase by 25%. Calculate the following for both situations (before buying the new machine and after buying machine 3); 1. Contribution margin per unit? 2. Breakeven point unit? 3. How many parts he need to sell in order to get $8,000 operating income? 4. Based on your answer, which option should he choose?

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Working Variable cost per unit before buying machine M3 250 150 10 parts 40 Variable cost per unit after buying machine M3 40 320 5 parts 40 64 104 To... View full answer

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