Cost Estimation; Machine Replacement; Ethics Hardison Inc. manufactures glass for office b...

Cost Estimation; Machine Replacement; Ethics Hardison Inc. manufactures glass for office buildings in Florida. As a result of age and wear, a critical machine in the production process has begun to produce quality defects. Hardison is considering replacing the old machine with a new machine, either brand A or brand B. The manufacturer has provided Hardison with the following data on the cost of operation of each machine at various levels of output:

Required

1. Use the high-low method to determine the cost equations for each machine. If Hardison’s output is expected to be 40,000 square yards, which machine should it purchase? At 25,000 and at 60,000 square yards? Is the high-low method useful here? Why or why not?

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2. As a cost analyst at Hardison, you have been assigned to complete requirement 1. A production supervisor comes to you to say that the nature of the defect in the product for the current machine is really very difficult to detect and that most customers will not notice it, so he questions replacing the machine. He suggests that you modify your calculations to justify keeping this machine to keep things the way they are and save the company some money. What do you say?

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3. Assume that machine A is manufactured in Germany and machine B is manufactured in Canada. As a U.S.-based firm, what considerations are important to Hardison, in addition to those already mentioned in your answer to requirement 1?