Automatic versus Manual Processing

Mid-Town Copy Service processes 2,100,000 photocopies per month at its mid-town service center. Approximately 50 percent of the photocopies require collating. Collating is currently performed by high school and college students who are paid $8 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 6,000,000 photocopies, with lease and operating costs totaling $1,550, plus $0.05 per 1,000 units collated.

(a) Determine the total costs of collating 500,000 and 1,500,000 per month:

1. With student help.

500,000Answer

1,500,000Answer

2. With the collating machine.

500,000Answer

1,500,000Answer

(b) Determine the monthly volume at which the automatic process becomes preferable to the manual process.

Answer

copies