Quality improvement, relevant costs, and relevant revenues. The Photon Corporation manufactures and sells 20,000 copiers each year. The variable and fixed costs of reworking and repairing copiers are as follows:

Variable Costs Fixed Costs Total Costs

$ 48 $72 $120 24 36 60 216 72 288 54 78 132 Photon’s engineers are currently working to solve the problem of copies being too light or too dark. They propose changing the lens of the copier. The new lens will cost $60 more than the old lens. Each copier uses one lens. Photon uses a one-year time horizon for this decision, since it plans to introduce a new copier at the end of the year. Photon believes that even as it improves quality, it will not be able to save any of the fixed costs of rework or repair.

By changing the lens, Photon expects that it will (1) save 12,000 hours ofrework, (2) save 800 hours of customer support, (3) move 200 fewer loads, (4) save 8,000 hours of repair, and

(5) sell 100 additional copiers for a total contribution of $720,000.

Rework costs per hour Repair costs Customer support costs per/hour Transportation costs per load Warranty repair costs per hour Required 1. What are the additional costs of choosing the new lens?

2. What are the additional financial benefits of choosing the new lens?

3. Should Photon change to the new lens? Show' your calculations.