Poller-Holler LTD, has experienced an increase in sales of about 22% during the past year relative...

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Poller-Holler LTD, has experienced an increase in sales of about 22% during the past year relative to last year. While this is good news, the company has NOT been able to increase its production capacity fast enough Management does not want to continue to turn away projects because it cannot keep up with the increased demand A consultant was hired to study the situation and has recommended that consideration be given to the purchase of automated painting stations. These stations would, according to the consultants, be a significant move in the right direction. This direction is away from manual and toward automation Unfortunately, about 20% of the company's workforce would have to be terminated Poller-Holler's financial management compiled financial information and put together a comparison of manual versus automation. Note below that the automation appears more profitable Automation $5,000,000 Sales Variable Costs Contribution Margin Fixed Cost Net Income Manual $5,000,000 3.200.000 1,800,000 921.500 $878.500 2.500.000 2,500,000 1.940.000 $ 560.000 1. Compute the contribution margin ratio for each approach. Interpret the contribution margins. Be specific. 2. What is the beak-even point in sales for each approach? What are the implications of your findings? Be specific. 3. Determine the degree of operating leverage for each approach? company's net income for each approach if sales declined 12%? What would you recommend based on the information provided? would you like to have? Be Specific. 4. What would happen to the Discuss clearly. What additional information Poller-Holler LTD, has experienced an increase in sales of about 22% during the past year relative to last year. While this is good news, the company has NOT been able to increase its production capacity fast enough Management does not want to continue to turn away projects because it cannot keep up with the increased demand A consultant was hired to study the situation and has recommended that consideration be given to the purchase of automated painting stations. These stations would, according to the consultants, be a significant move in the right direction. This direction is away from manual and toward automation Unfortunately, about 20% of the company's workforce would have to be terminated Poller-Holler's financial management compiled financial information and put together a comparison of manual versus automation. Note below that the automation appears more profitable Automation $5,000,000 Sales Variable Costs Contribution Margin Fixed Cost Net Income Manual $5,000,000 3.200.000 1,800,000 921.500 $878.500 2.500.000 2,500,000 1.940.000 $ 560.000 1. Compute the contribution margin ratio for each approach. Interpret the contribution margins. Be specific. 2. What is the beak-even point in sales for each approach? What are the implications of your findings? Be specific. 3. Determine the degree of operating leverage for each approach? company's net income for each approach if sales declined 12%? What would you recommend based on the information provided? would you like to have? Be Specific. 4. What would happen to the Discuss clearly. What additional information

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1The contribution margin ratio for manual production is 36 18000005000000 while for the automated ap... View the full answer