Assume Office Depot processes 2,500,000 photocopies per month at its service center. Approximately 50% of the photocopies
Question:
Assume Office Depot processes 2,500,000 photocopies per month at its service center. Approximately 50% 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 6,000,000 photocopies, with lease and operating costs totaling $3,000, plus $0.05 per 1,000 units collated.
A. Determine the total costs of collating 1,000,000 and 2,000,000 per month:
1. With student help.
2. With the collating machine.
B. Determine the monthly volume at which the automatic process becomes preferable to (costs less than) the manual process.
Management Accounting Information for Decision-Making and Strategy Execution
ISBN: 978-0137024971
6th Edition
Authors: Anthony A. Atkinson, Robert S. Kaplan, Ella Mae Matsumura, S. Mark Young