Mary Is Considering Purchasing a Machine from One of Two

question 166

Essay

Mary is considering purchasing a machine from one of two suppliers. Supplier A's machine has an annual fixed cost of $10,000 and a unit variable cost of $2.10. Supplier B's machine has an annual fixed cost of $16,000 and a unit variable cost of $3.00. How large should Mary's annual demand be in order to make Supplier B's machine the better choice?

Differentiate between absorption and variable costing.

Calculate net income under variable and absorption costing.

Understand the impact of operational decisions on net income.

Calculate and understand contribution margin.

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