California State University Chico Operations And Supply Chain Management Assignment Help - DECISION MAKING

Question - DECISION MAKING ACROSS THE ORGANIZATION
BYP 18-1 Martinez Company has decided to introduce a new product. The new product can be
manufactured in 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 Labor
Intensive 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 marketing research department has recommended an introductory unit sales price of $30.
The incremental selling expenses are estimated to be $502,000 annually plus $2 fo ...Read More r each unit sold,
regardless of manufacturing method.
Instructions:
(a) Calculate the estimated breakeven 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 circumstances under which Martinez should employ each of the two manufacturing
methods. ...Read Less

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