Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

For nearly 20 years, Sandhill Coatings has provided painting and galvanizing services for manufacturers in its region. Manufacturers of various metal products have relied

image text in transcribedimage text in transcribed

For nearly 20 years, Sandhill Coatings has provided painting and galvanizing services for manufacturers in its region. Manufacturers of various metal products have relied on the quality and quick turnaround time provided by Sandhill Coatings and its 20 skilled employees. During the past year, as a result of a sharp upturn in the economy, the company's sales have increased by 30% relative to the previous year. The company has not been able to increase its capacity fast enough, so Sandhill Coatings has had to turn work away because it cannot keep up with customer requests. Top management is considering the purchase of a sophisticated robotic painting booth. The booth would represent a considerable move in the direction of automation versus manual labour. If Sandhill Coatings purchases the booth, it would most likely lay off 15 of its skilled painters. To analyze the decision, the company compiled production information from the most recent year and then prepared a parallel compilation assuming that the company would purchase the new equipment and lay off the workers. As you can see, the company projects that during the past year it would have been far more profitable if it had used the automated approach. Current Approach Automated Approach Sales $2,400,000 $2,400,000 Variable costs 1,080,000 600,000 Contribution margin 1,320,000 1,800,000 Fixed costs 239,800 720,000 Operating income $1,080,200 $1,080,000 Calculate the contribution margin ratio under each approach. Current Approach Contribution margin ratio Calculate the break-even point in sales dollars under each approach. Current Approach Break-even point Automated Approach % Automated Approach

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Human Resource Management

Authors: John Bernardin

6th Edition

978-0078029165, 0078029163

More Books

Students also viewed these Accounting questions

Question

If the person is a professor, what courses do they teach?

Answered: 1 week ago