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ABC Company is considering changing its cost structure by investing in automation which means acquiring computer-controlled robots and reducing the labor force. Data for the
ABC Company is considering changing its cost structure by investing in automation which means acquiring computer-controlled robots and reducing the labor force. Data for the current environment and the new automated environment are as follows: Current New $ 1.00 1.00 1.40 2.40 an $ 0.20 1.20 $ $ Unit variable cost Material Labor Total per unit Monthly fixed costs Rent and amortization Supervisory labor Other Total per month $ 460,000.00 $ 100,000.00 50,000.00 610,000.00 $ 910,000.00 120,000.00 80,000.00 1,110,000.00 $ Expected volume Capacity volume 600,000 units 900,000 units Sale price per unit $ 4.50 a) Compute the budgeted profit at the expected volume under both current and new environments. b) Compute the budgeted profit for both the current and new environments if volume of sales falls to: 300,000 units c) Compute the budgeted profit for both the current and new environments if volume of sales increases to: 900,000 units
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