Answer:
a. Determine the total costs of collating 500,000 and 1,700,000 per month:1. With student help.2. With the collating machine.
total collating costs with student help:
- total cost of collating 500,000 units = (500,000 / 5,000) x $9 = $900
- total cost of collating 1,700,000 units = (1,700,000 / 5,000) x $9 = $3,060
total collating costs with collating machine:
- total cost of collating 500,000 units = $1,550 + (500,000 / 1,000) x $0.05 = $1,575
- total cost of collating 1,700,000 units = $1,550 + (1,700,000 / 1,000) x $0.05 = $1,635
b. Determine the monthly volume at which the automatic process becomes preferable to the manual process.
(x / 5,000) x $9 = $1,550 + [(x / 1,000) x $0.05]
x ($9/5,000) - x($0.05/1,000) = $1,550
$0.0018x - $0.00005x = $1,550
$0.00175x = $1,550
x = $1,550 / $0.00175 = 885,714.3 or <u>885,715 units</u>
cost using student help = (885,715/5,000) x $9 = $1,594.29
cost of using collating machine = $1,550 + [(885,715 / 1,000) x $0.05] = $1,594.28
