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PIM Industries Incorporated manufactures electronics components. Each unit costs $45 before the final test. The final test rejects, on average, 5% of the 65,000 units
PIM Industries Incorporated manufactures electronics components. Each unit costs $45 before the final test. The final test rejects, on average, 5% of the 65,000 units manufactured per year. The average rejection rate of the industry is 3%. A consultant has determined that poor lighting is the most likely cause of this high rejection rate. It would cost $200,000 to install adequate lighting in the assembly department, which would be useful for 5 years. With adequate lighting (which will cost an additional $7,000 of operating costs per year), the firm expects to reduce its rejection rate to no higher than the industry average. Required: 1-a. What would be the projected five-year impact on operating profit? Five-year projected effect on operating income
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