Question

Automatic versus Manual Processing

Image Solutions operates a printing service for customers with digital cameras. The current service, which requires employees to download photos from customer cameras, has monthly operating costs of $7,000 plus $0.30 per photo printed. Management is evaluating the desirability of acquiring a machine that will allow customers to download and make prints without employee assistance. If the machine is acquired, the monthly fixed costs will increase to $13,000 and the variable costs of printing a photo will decline to $0.05 per photo. 

(a) Determine the total costs of printing 20,000 and 50,000 photos per month.

(b) Determine the monthly volume at which the proposed process becomes preferable to the current process.

Answer 1