Piltdown Plating has been in operation for 20 years and applies metal coatings, such as chromium...
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Piltdown Plating has been in operation for 20 years and applies metal coatings, such as chromium or silver, to metal items by electro-chemical processes. Each job is unique, and the company prides itself on the skill of the workers and the quality of the final product. The production machin- ery has been depreciated to nil value, but it is still functional. There are 20 workers: 5 operate the machines that remove the old coatings: 2 work on the degreasing tanks; 5 operate the plating machines: and 3 are in the raw material store. The remaining 5 are less skilled and do final cleaning and packing. Results for a recent month were as follows: Sales revenue Raw materials Production wages Production salaries Administrative salaries Employee benefits and on-costs (20% of total wage bill) Rent Utilities Repairs and renewals Marketing and advertising Factory depreciation Total cost Operating profit $ 250,000 $ 100,000 50,000 10,000 5,000 13,000 10,000 5,000 2,000 5,000 nil $ 200,000 $50,000 The production manager has been told by the owners that the com- pany is not profitable enough, so he has been investigating some ways of improving the return on investment. He has identified a new computerized cleaning machine that will elimi- nate the need for five of his workers and save $12.500 in direct wage costs every month. This machine can be rented for $5,000 per month. It will also require additional power, so utility costs will go up by 10%. Required Discuss the effect of renting the new machine on the following: • Profitability • The break-even point and the risk of the company Human resource management Piltdown Plating has been in operation for 20 years and applies metal coatings, such as chromium or silver, to metal items by electro-chemical processes. Each job is unique, and the company prides itself on the skill of the workers and the quality of the final product. The production machin- ery has been depreciated to nil value, but it is still functional. There are 20 workers: 5 operate the machines that remove the old coatings: 2 work on the degreasing tanks; 5 operate the plating machines: and 3 are in the raw material store. The remaining 5 are less skilled and do final cleaning and packing. Results for a recent month were as follows: Sales revenue Raw materials Production wages Production salaries Administrative salaries Employee benefits and on-costs (20% of total wage bill) Rent Utilities Repairs and renewals Marketing and advertising Factory depreciation Total cost Operating profit $ 250,000 $ 100,000 50,000 10,000 5,000 13,000 10,000 5,000 2,000 5,000 nil $ 200,000 $50,000 The production manager has been told by the owners that the com- pany is not profitable enough, so he has been investigating some ways of improving the return on investment. He has identified a new computerized cleaning machine that will elimi- nate the need for five of his workers and save $12.500 in direct wage costs every month. This machine can be rented for $5,000 per month. It will also require additional power, so utility costs will go up by 10%. Required Discuss the effect of renting the new machine on the following: • Profitability • The break-even point and the risk of the company Human resource management
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Renting the new computerized cleaning machine will have various effects on the profitability breakeven point risk and human resource management of Piltdown Plating 1 Profitability Renting the new mach... View the full answer
Related Book For
Smith and Roberson Business Law
ISBN: 978-0538473637
15th Edition
Authors: Richard A. Mann, Barry S. Roberts
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