Dogs-Are-Us, Inc. has the following information available at the end of last year: Due to recent events, the company has moved all production from labor-based to automation so that it would not need to shut down the factory. By doing this, the variable costs have decreased by 30%, and the fixed costs have increased by 20%. Based on these changes, with no change in sales for the upcoming year, what is the expected contribution margin and operating income based on these changes? Is the company more profitable by making this change? Why?

Question

Dogs-Are-Us, Inc. has the following information available at the end of last year:   Due to recent events, the company has moved all production from labor-based to automation so that it would not need to shut down the factory. By doing this, the variable costs have decreased by 30%, and the fixed costs have increased by 20%. Based on these changes, with no change in sales for the upcoming year, what is the expected contribution margin and operating income based on these changes? Is the company more profitable by making this change? Why?

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The Answer of Dogs-Are-Us, Inc. has the following information available at the end of last year:   Due to recent events, the company has moved all production from labor-based to automation so that it would not need to shut down the factory. By doing this, the variable costs have decreased by 30%, and the fixed costs have increased by 20%. Based on these changes, with no change in sales for the upcoming year, what is the expected contribution margin and operating income based on these changes? Is the company more profitable by making this change? Why?