The president believes that the company has too much fixed expense in the cost structure and...

 

 

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The president believes that the company has too much fixed expense in the cost structure and would like to replace some of the machinery with direct labor workers. If the change is made the current fixed expenses will decrease by $50,000 and variable expenses would increase by 20%. Sales ($140 x 4,000 units) Total variable expense ($50 x 4,000 units) Contribution margin Total fixed expense NOI $560,000 200,000 360,000 355.000 $5,000 Should the company make the change? State your opinion and reasons. Include any calculations that help you make the decision. The president believes that the company has too much fixed expense in the cost structure and would like to replace some of the machinery with direct labor workers. If the change is made the current fixed expenses will decrease by $50,000 and variable expenses would increase by 20%. Sales ($140 x 4,000 units) Total variable expense ($50 x 4,000 units) Contribution margin Total fixed expense NOI $560,000 200,000 360,000 355.000 $5,000 Should the company make the change? State your opinion and reasons. Include any calculations that help you make the decision.