Automatic versus Manual Processing Mid-Town Copy Service processes 1,900,000 photocopies per month at its mid-town service center. Approximately 60 percent of the photocopies require collating. Collating is currently performed by high school and college students who are paid $10 per hour. Each student collates an average of 5,000 copies per hour. Management is contemplating the lease of an automatic collating machine that has a monthly capacity of 5,000,000 photocopies, with lease and operating costs totaling $985, plus $0.03 per 1,000 units collated.

A. Determine the total costs of collating 500,000 and 1,500,000 per month:

1. With student help:

2. With the collating machine:

B. Determine the monthly volume at which the automatic process becomes preferable to (cost less than) the manual process.