Accounting Wk 5 Break Even Calculations
racael2
wk_5_excel_template_assignment.xlsxSheet1
| a) Calculate the estimated break-even point in annual unit sales of the new product if the Sanchez Company uses the: | |||||
| Show your work with the appropriate calculations in the cells | |||||
| Capital Intensive Method | Labor Intensive Method | ||||
| b) Determine annual unit sales volume at which the Sanchez Company would be indifferent between the two manufacturing methods | |||||
| Show your work with the appropriate calculations in the cells | |||||
| c) Explain the circumstance under which the Sanchez Company should employ each of the two manufacturing methods |
The Sanchez 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 Direct Materials 5$ per unit Direct Labor 6$ per unit Variable Overhead $3 per unit Fixed Manufacturing Costs $2,508,000 Labor Intensive Direct Materials 5.5$ per unit Direct Labor 8$ per unit Variable Overhead $4.5 per unit Fixed Manufacturing Costs $1,538,000 The Martinez Company’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
