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A company manufactures birdcages. They are considering modifying their operations by adopting a new machine that will replace some of their direct labour costs
A company manufactures birdcages. They are considering modifying their operations by adopting a new machine that will replace some of their direct labour costs and eliminate the need for one of their plant supervisors. The current results, and anticipated results if the changes are adopted are as follows: Selling price per unit Variable Costs per unit: Manufacturing Selling and admin Current Results $25 Proposed change $25 10 2 8 2 Fixed costs: Manufacturing Selling and admin $10,000 2,000 $14,000 2,000 Assume that sales and production are equal. At what volume is the company indifferent between the current situation and the proposed changes? Show your work.
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