How does the use of a robotic shopping assistant impact the breakeven point and operating leverage at Lowe’s?

Photo courtesy of Lowe's Innovation Labs

Photo courtesy of Lowe’s Innovation Labs

Lowe’s, a U.S.-based chain of retail home improvement stores, is introducing a robotic shopping assistant into its Orchard Supply Hardware store in San Jose, California.  The robot, called OSHbot, will greet customers and assist customers in finding products.  In addition, the robot has one large screen on the front and one on the back.  The screens are used for video conferences with a store expert and display advertising about store products.  Eventually, the robot may have the ability to create parts customers want with a 3-D printer.

The robot is able to speak both English and Spanish.  It can navigate the store using the same technology found in Google’s driverless cars.

Lowe’s is not revealing how much it spent on building the robot but it is speculated to be quite expensive, since the navigation system alone costs roughly $50,000.  For now, Lowe’s will use two OSHbots in the store and evaluate future investments. Technology costs are dropping rapidly so more robotic shopping assistants are likely to be developed in future years

Assume that a “typical” customer service associate at Lowe’s is paid hourly and works between 10 – 30 hours per week.

Questions

  1. What type of cost (fixed, variable, or mixed) is represented by the wages and benefits paid to a customer service associate at Lowe’s? Justify your answer.
  2. What type of cost (fixed, variable, or mixed) is cost of the OSHbot at Lowe’s? Explain.
  3. Assume that each OSHbot can replace four customer service associates at the store. How does the change in cost structure at the store impact the store’s breakeven point?
  4. Again assume that each OSHbot can replace four customer service associates at the store. How will OSHbot impact the store’s operating leverage factor?

Instructor Resources

These resources are provided to give the instructor flexibility for use of Accounting in the Headlines articles in the classroom. The blog posting itself can be assigned via a link to this site OR by distributing the student handout below. Alternatively, the PowerPoint file below contains a bullet point overview of the article and the discussion questions.

  • Student handout (pdf) (word) (contains entire blog posting + discussion questions)
  • PowerPoint file (brief article overview + discussion questions)

Creative Commons License

This work is licensed under a Creative Commons Attribution-NonCommercial 3.0 Unported License.

About Dr. Wendy Tietz, CPA, CMA, CGMA

Dr. Wendy Tietz is a professor of accounting at Kent State University in Kent, Ohio, USA. She is also a textbook author with Pearson Prentice-Hall.

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