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BYP18-1 Martinez Company




Question;BYP18-1;Martinez;Company has decided to introduce a new product. The new product can be;manufactured by either a capital-intensive method or alabor-intensive method.;The manufacturing method will not affect the quality of the product. The;estimated manufacturing costs by the two methodsare as follows.;Capital-IntensiveLabor-Intensive;Direct;materials $5 per;unit $5.50 per unit;Direct;labor $6 per;unit $8.00 per unit;Variable;overhead $3 per unit $4.50 per unit;Fixed;manufacturing costs $2,508,000 $1,538,000;Martinez?s;market research department has recommended an introductory unit sales price of;$30. The incremental selling expenses are estimated tobe $502,000 annually plus;$2 for each unit sold, regardless of manufacturing method.;Instructions;With;the class divided into groups, answer the following.;(a);Calculate the estimated break-even point in annual unit sales of the new;product if Martinez Company uses the;(1) Capital-intensive manufacturing method.;(2) Labor-intensive manufacturing method.;(b);Determine the annual unit sales volume at which Martinez Company would be;indifferent between the two manufacturing methods.;(c);Explain the circumstance under which Martinez should employ each of the two;manufacturing methods.


Paper#41982 | Written in 18-Jul-2015

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