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You are the president of a small manufacturing company, and you are constantly looking for a...

You are the president of a small manufacturing company, and you are constantly looking for a way to increase profits.  
You are considering changing your cost structure to include more fixed costs and less variable costs by automating some of the product activities that are currently very labor intensive.  
What are some of the considerations that you should keep in mind as you consider this decision?
More generally, how are profit opportunities and the risk of losses affected by operating leverage?

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Answer #1

The company is looing to increase profit changing cost structure to include more fixed cost and less variable costs by automating some of the product activities that are currently very labour intensive.This may affect risk of company as if a sudden accident happen there is no man mind so sudden decision is not take place,By atomation we can reduce by reducing salary pension contribution like that but the fixed cost will as automation come electricity bill increase and the fixed cost increasebut fixed cost is a fixed price so the increase is not that huge compared to variable cost but overall it will increase profit,but sam way the risk also increase as machine have no decision mind and sudden change cant handle so intensity for risk is very high on the same time profit will increase.

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