Correction

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Amaron Furniture Inc. choice between labour intensive or automated process

Executive summary

In this report compare two different situations. The first situation is labour intensive process and the second situation is the automated process. This choice is compared at the factor earnings before interest and tax. The answer at this question is the automated process, but to introduce one year later.

Introduction

Amaron Furniture Inc. would like to know if it is cheaper to automatize the production or to work with employees. In this report is compared two different situations. One situation is labour intensive process and the other situation is the automated process. The best choice is the automated process. This choice is based at the factor: “the earnings before interest and tax”. This is based on a fact file and on a calculation. The structure of this report is as follows. Firstly, the data is analyzed and lastly, the recommendation.

Data analysis

The earnings before interest and tax

The earnings before interest and tax helps to make the choice which the best one is. If the earnings before interest and tax of the labour intensive process is lower than the automated process. Than is the automated process the best choice. In this case, the best choice is the automated process. For the first two years the earnings before interest and tax for the labour intensive process is respectively $1,800,000 and $2,120,000. For the automatic process are the earnings before interest and tax respectively $1,800,000 and $2,280,000. The second year is more than the labour intensive process, the best choice is than the automatic process. One problem is the expected production have to be not less than 8,000 units. Then are the labour intensive process lower than the automated process.

Conclusion

In concluding, the best process for the Amaron Furniture Inc. is the automated process.

This is based at the earnings before interest and tax for the both options of the processes. The earnings before interests and taxes for the automated process is higher than for the labour intensive process.

Recommendations

The earnings before interest and tax

The problem of the earnings before interest and tax is that the expected production have to be not less than 8,000 units. My advice is to invest one year later. The first year it never mind which one you choice, but if you produce less than the expected production of 8,000 units it is better to choice for the labour intensive process. In year two are the expected production better than in the first year and then is the best choice to step over at the automated process.