Cost Management: A Strategic Emphasis 7th Edition by Edward Blocher,David Stout ,Paul Juras,Gary Cokins

Exercise 23

Make or Buy; Continuation of Exercise 9-22 (Chapter 9) Vista Company manufactures electronic equipment. In 2015, it purchased from an outside supplier the special switches used in each of its products. The supplier charged Vista $2 per switch. As an alternative, Vista's CEO considered purchasing either machine A or machine B so the company could manufacture its own switches. The CEO decided at the beginning of 2016 to purchase machine A. based on the following data:

Required
1. Assume that machine A has not yet been purchased. What is the indifference point between purchasing machine A and purchasing the switches from the outside vendor
2. Assume that machine A has already been purchased. Is it preferable to use machine A to make the switches or to purchase the switches from the external supplier
3. At what volume level should Vista consider replacing machine A with machine B
4. Use the Goal Seek function in Excel to determine the volume-indifference level you calculated above in requirement 3.