Q1: Suppose there are two options to replace a broken yet critical machine. One is to buy a new CNC machine that has a fixed cost of $500,000 and a variable cost of $4. The second option is to buy a used 5-axis milling machine in pretty good shape that costs only $20,000 but the variable costs are $10. What is the indifference point between the two options?

a. 80,000 units

b. None of these answers is even close

c. $520,000

d. 37,143 units

e. $480,000

Q2: Suppose there are two options to replace a broken yet critical machine. One is to buy a new CNC machine that has a fixed cost of $500,000 and a variable cost of $4. If the revenue per unit is $20, what is the break-even-point?

a. 31,250 units

b. None of these answers is even close

c. $625,000

d. 25,000 units

e. $500,000

Q3: Suppose there are two options to replace a broken yet critical machine. The second option is to buy a used 5-axis milling machine in pretty good shape that costs only $20,000 but the variable costs are $10. What is the break-even-point of this option if revenue per unit was $20?

a. $30,000

b. 1000 units

c. None of these answers is even close

d. $20,000

e. 2000 units

Q4: Suppose there are two options to replace a broken yet critical machine. One is to buy a new CNC machine that has a fixed cost of $500,000 and a variable cost of $4. If Marketing has determined low demand = 50,000 units with probability 60% and high demand of 150,000 units with probability 40%, what is the expected cost of this option?

a. None of these answers is even close

b. $860,000

c. $920,000

d. $1,800,000

e. $1,360,000

Q5: Suppose there are two options to replace a broken yet critical machine. The second option is to buy a used 5-axis milling machine in pretty good shape that costs only $20,000 but the variable costs are $10. If Marketing has determined low demand = 50,000 units with probability 60% and high demand of 150,000 units with probability 40%, what is the expected cost of this option?

a. $940,000

b. $860,000

c. $20,000

d. $920,000

e. None of these answers is even close

Q6: Suppose there are two options to replace a broken yet critical machine. One is to buy a new CNC machine that has a fixed cost of $500,000 and a variable cost of $4. The second option is to buy a used 5-axis milling machine in pretty good shape that costs only $20,000 but the variable costs are $10. If Marketing has determined low demand = 50,000 units with probability 60% and high demand of 150,000 units with probability 40%, which option should the company choose?

a. The high demand option. Higher demand is always better than low demand

b. The low demand option. It costs the company the least amount of money

c. Option 1, the CNC machine is the most cost efficient option given Marketing's scenarios

d. None of these answers is even close

e. Option 2, the 5-axis milling machine is the most cost effective option given Marketing's scenarios