Decision Making Across the Organization case study

ACCOUNTING 561″
Writea paper of no more than 750 words in which you respond to the Broadening Your Perspective 18-1 activity titled “Decision Making Across the Organization” in Ch. 18 ofAccounting.
 
BYP18-1
 
 
DECISION MAKING ACROSS THE ORGANIZATION
Martinez Company has decided to introduce a new product. The new product can be manufactured by either a 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
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 of the new product if Martinez Company uses the:
1.
.
2.
.
(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.

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