Williams Company is considering the purchase of a new automated assembly line for its factory. The purchase would result in several changes in Williams’ cost structure. Both direct labor and indirect labor would decrease by 40%. Factory insurance would increase to $8,000, machinery depreciation would double, machinery repairs would decrease to $500, utilities would decrease to $2,500 and miscellaneous factory costs would increase to $1,850. Materials usage would remain at current levels.
Analyze the new purchase by preparing a cost of goods manufactured schedule for September 30, 2020 using the new data. Should Williams Company make this purchase? Explain the factors that should be considered in the decision?
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