ACCA Applied Knowledge · Business and Technology · Technological factors
A manufacturer installs robots that perform tasks previously done by skilled workers. Which is the most likely direct effect on its cost structure?
Fixed costs rise and variable labour costs fall. Buying robots adds depreciation, maintenance and financing charges, which are fixed, while replacing workers reduces labour costs that vary with output, so the firm becomes more operationally geared.
- AFixed costs rise and variable labour costs fallCorrect
- BFixed costs fall and variable labour costs rise
- CBoth fixed and variable costs rise
Explanation
Robots require capital investment, giving depreciation and maintenance, which are fixed costs. Direct labour, usually variable, falls. The second option reverses the effect.
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