Berry Company is considering the acquisition of a computerized manufacturing system.

The new system has a built-in quality function that increases the control over product specifications. An alarm sounds whenever the product falls outside the programmed spec¬

ifications. An operator can then make some adjustments on the spot to restore the desired product quality. The system is expected to decrease the number of units scrapped be¬

cause of poor quality. The system is also expected to decrease the amount of labor inputs needed. The production manager is pushing for the acquisition because he believes that productivity will be greatly enhanced—particularly when it comes to labor and material inputs. Output and input data are given below. The data for the computerized system are projections.

Required:
1. Compute the partial operational ratios for labor and materials under each alternative.
Is the production manager right in thinking that labor and materials productivity in¬
crease with the automated system?
2. Compute the productivity profiles for each system. Does the computerized system im¬
prove productivity?
3. Determine the amount by which profits will change if the computerized system is adopted. Are the trade-offs among the inputs favorable? Comment on the system's abil¬
ity to improve productivity.

Transcribed Image Text:

Current System Computerized System Output (units) 50,000 50,000 Output selling price $40 $40 Input quantities: Materials 200,000 175,000 Labor 100,000 75,000 Capital (dollars) 100,000 500,000 Energy 50,000 125,000 Input prices: Materials $4.00 $4.00 Labor $9.00 $9.00 Capital (percent) 10.00% 10.00% Energy $2.00 $2.50