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University of Phoenix ACC 561 Martinez Company

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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;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#80371 | Written in 18-Jul-2015

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