BYP18-1 ;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.
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;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.
Show all supporting calculations for part a ;
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.