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 $75,000and a variable cost of $16, with a capacity of 18,000 units peryear. Machine B is slower, with a speed of one-half of A’s, butthe 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 unitsfor the two machines?b) What is the range of units for which machine A ispreferable?c) What is the range of units for which machine B is preferable?

Practical Management Science
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ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
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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
preferable?
c) What is the range of units for which machine B is preferable?

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