Automatic versus Manual Processing Red Star Copy Service processes 2,100,000 pho

Question

Automatic versus Manual Processing

Red Star Copy Service processes 2,100,000 photocopies per month at its service center.

Approximately 50 percent of the photocopies require collating. Collating is currently performed

by high school and college students who are paid $9 per hour. Each student collates an average

of 5,000 copies per hour. Management is contemplating the lease of an automatic collating ma-

chine that has a monthly capacity of 6,000,000 photocopies, with lease and operating costs totaling

$1,550, plus $0.05 per 1,000 units collated.

b. Determine the monthly volume at which the automatic process becomes preferable to the

manual process.

Re d Star Copy Service Annual versus Manual Processing Processed Photocoplesper Month Required Collated Photocoples High Schhol Wage Collated Coples per Hour New machine Capacity per Month Lease and Operating Costs Total Plus $0.05 per 1,000 units 2,100,000 0.5 $9.00 5,000 6,000,000 $1550 Plus $0.05 per 1,000 Units Determine the total costs of collating With Student Help With the collating machine 500,000 per month $900.00 Determine the total costs of collating With Student Help With the collating machine 1,700,000 per month 3,060.0 635 Determine the monthly volume at which the automatic process be comes preferable to the manual process

Explanation / Answer

$1550+$0.05*X/1,000=$9*X/5,000

x=885714

When the monthly volume is over 885714, the automatic process becomes preferable to themanual process

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