Management of a manufacturing unit is considering extensive modernization of the factory through progressive mechanization, which would result in improved productivity and reduced strength. Through negotiations with the union, it was agreed that for every 1% increase in productivity, workers would be paid 0.5% incentive wages. It was also agreed that through voluntary retirement the staff strength would be reduced to 300 from the present level of 400. The following further comparative data are available before and after the proposed mechanization.
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Particulars |
Before mechanization |
After mechanization |
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Number of articles produced per month |
50, 000 |
48, 000 |
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Fringe benefits: 50% of wages |
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|
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Wages paid per month: Rs.4, 00, 000 |
|
|
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Sales per month: [value] Rs.24, 00, 000 |
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|
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Profit/volume ratio: 25% |
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Based on the above data, you are required to work out the annual financial implications of the proposal.