Automatic versus Manual Processing
Mid-Town Copy Service processes 1,800,000 photocopies per month at its mid-town service center. Approximately 60 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 machine that has a monthly capacity of 5,000,000 photocopies, with lease and operating costs totaling $1,056, plus $0.04 per 1,000 units collated.
(a) Determine the total costs of collating 500,000 and 1,300,000 per month:
1. With student help:
2. With the collating machine:
(b) Determine the monthly volume at which the automatic process becomes preferable to the manual process.
(c) Should Mid-Town Copy lease the automatic collating machine at this time?