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The Martinez Company has decided to introduce a new product. The new product can be manufactured by

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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;Direct Materials 5$ per unit;Direct Labor 6$ per unit;Variable Overhead $3 per unit;Fixed Manufacturing Costs $2,508,000;Labor Intensive;Direct Materials 5.5$ per unit;Direct Labor 8$ per unit;Variable Overhead $4.5 per unit;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.

 

Paper#79989 | Written in 18-Jul-2015

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