A few years ago the ACME Manufacturing Company installed automated robots worth millions of dollars in its furniture assembly lines believing that the robots would improve profitability and increase the efficiency of the manufacturing process. However ACME lost many millions of dollars more despite the fact that it was able to make furniture faster using the robots. Why would this happen? What could have caused this situation? ACME then tried to increase profits (operating income) by making more products that could be sold in a period. Should this tactic be used to increase operating income? Would this happen in service companies or only manufacturing companies? Explain.
Over the past few decades the cost structure of manufacturing companies has shifted. In the early 1900s direct material costs were substantial while fixed costs represented a small fraction of total manufacturing costs. However the cost structure has reversed and now fixed costs make up the majority of total manufacturing costs. What caused this to happen? What would explain the drastic change in cost structure? Which industries would be most affected by this change?
Accounting Help! 16