A few years ago, the ACME Manufacturing Company installed automated robots worth

Question

A few years ago, the ACME Manufacturing Company installed automated robots worth millions of dollars in its furniture assembly lines, believing that the robots would improve profitability and increase the efficiency of the manufacturing process. However, ACME lost many millions of dollars more despite the fact that it was able to make furniture faster using the robots. Why would this happen? What could have caused this situation? ACME then tried to increase profits (operating income) by making more products that could be sold in a period. Should this tactic be used to increase operating income? Would this happen in service companies or only manufacturing companies? Explain.

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Explanation / Answer

huge amount of fixed costs and that over burdened fixed costs would not able to provide profitability to the organization. ACME could apply this method of increasing profits by making more products but before that it has to create the market of that product in the wider area or it has to increase its market share. If the organization is able to do this, then it can enhance its profits by increasing the revenues of the company which would then be able to offset the fixed costs. Therefore, this tactic should be used to increase its operating incom

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