PIM Industries Incorporated manufactures electronics components. Each unit costs $$45$ before the final test. The final test rejects, on

average, $5\%$ of the $62,000$ 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 $$185,000$ to install adequate lighting in the assembly

department, which would be useful for $5$ years. With adequate lighting $($which will cost an additional $$6,700$ 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

$1-$b$.$ Based solely on the relevant cost analysis you performed, should the firm install the lighting?

Yes

No