A car manufacturer is considering one of two systems for its windshield assembly line.
The first is a robotic system that should save money due to a reduction in labor and materials costs. The robotic system will cost $400,000, and requires 1 full-time technician and 1 full-time material handler will be needed with this system. The full-time technician costs $60,000 per year and the material handler costs $52,000 per year. The expectation is to recover the cost of the robotic system over the first two years.
The second option is to select the manual system. The manual system requires 4 full-time material handlers at a cost of $52,000 each per year. If the manual system is selected, the company will incur additional costs of $0.50 per windshield installed.
Assume that only one windshield is installed per automobile.
1. How many automobiles are needed to be produced over the next two years to make the manufacturer indifferent economically between the two systems? Ignore the time value money and assume that the entire cost of the robotic system will be recovered during the first two years.