Martinez company has decided to introduce a new product the new

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.

 

Don't use plagiarized sources. Get Your Custom Essay on
Martinez company has decided to introduce a new product the new
Just from $13/Page
Order Essay

 

Capital-Intensive

Labor-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 to be $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.

(CMA adapted)

Calculator

Calculate the price of your paper

Total price:$26
Our features

We've got everything to become your favourite writing service

Need a better grade?
We've got you covered.

Order your paper