Question
Big Bang Corporation manufactures a single producta computer monitor. The following information is related to the companys monthly operations: Total Per Unit Sales (700 unites)
Big Bang Corporation manufactures a single producta computer monitor. The following information is related to the companys monthly operations: Total Per Unit Sales (700 unites) $210,000 $300 Variable expenses 80,500 115 Contribution Margin 129,500 185 Fixed expenses 67,500 Net Operating Income 62,000 Big Bangs production management decided to automate the production process of monitors by upgrading its machinery. The improved process will reduce direct-labor costs by $10 per unit. However, the upgrade will include an increase in the cost of leased equipment of $7,500 a month. The company further believes that the upgrade will make the monitors more reliable, which will increase monthly sales by 5%. What will be the total effect of the upgrade on Big Bangs monthly net operating income?
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