Management of ABC Company is considering new production robotics to replace some current manual labor operations for one of their product lines.ABC's current cost structure for this product line consists of variable expenses of $40 per unit and fixed expenses totaling $86,400 per month.If the robotics were installed, variable expenses would drop to $28 per unit, but fixed expenses would increase to $135,600 per month.
(a.) Define the term indifference point.
Calculate the indifference point between the alternative cost structures for $A B C$
(b.) Company's product line.
Explain how $\mathrm { ABC }$ 's management would use the indifference point in the
(c) decision to replace the manual operations with the new production robotics.

Question

Management of ABC Company is considering new production robotics to replace some current manual labor operations for one of their product lines.ABC's current cost structure for this product line consists of variable expenses of $40 per unit and fixed expenses totaling $86,400 per month.If the robotics were installed, variable expenses would drop to $28 per unit, but fixed expenses would increase to $135,600 per month.
 (a.) Define the term indifference point.
Calculate the indifference point between the alternative cost structures for $A B C$
(b.) Company's product line.
Explain how $\mathrm { ABC }$ 's management would use the indifference point in the
(c) decision to replace the manual operations with the new production robotics.

Quizplus · Accepted Answer

The Answer of Management of ABC Company is considering new production robotics to replace some current manual labor operations for one of their product lines.ABC's current cost structure for this product line consists of variable expenses of $40 per unit and fixed expenses totaling $86,400 per month.If the robotics were installed, variable expenses would drop to $28 per unit, but fixed expenses would increase to $135,600 per month.
 (a.) Define the term indifference point.
Calculate the indifference point between the alternative cost structures for $A B C$
(b.) Company's product line.
Explain how $\mathrm { ABC }$ 's management would use the indifference point in the
(c) decision to replace the manual operations with the new production robotics.

Management of ABC Company Is Considering New Production Robotics to Replace