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The Martinez Company has decided to introduce a new product.




Question;The Martinez Company has decided to introduce a new product.;The new product can be manufactured by either a capital-intensive method or a;labor-intensive method. The manufacturing method will not affect the quality of;the product. The estimated manufacturing costs by the two methods are as;follows;Capital-Intensive;Capital Intensive Labor Intensive;Direct Materials $5.00;per unit Direct Materials $5.50 per unit;Direct Labor;$6.00 per unit;Direct Labor;$8.00 per unit;Variable Overhead $3.00;per unit Variable;Overhead $4.50 per unit;Fixed Manufacturing Costs $2,508,000 Fixed Manufacturing;Costs $1,538,000;Martinez market research department has recommended an introductory unit sales;price of $30. The incremental selling expenses are estimated to be $502,000;annually plus $2 for each unit sold, regardless of manufacturing method.;a) Calculate the;estimated break-even point in annual unit sales of the new product if Martinez;Company uses the 1- Capital-intensive method;(2) Labor-intensive method.b) Determine;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#42887 | Written in 18-Jul-2015

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