We use cookies to give you the best experience possible. By continuing we’ll assume you’re on board with our cookie policy

Broadening Your perspective Essay Sample

essay
The whole doc is available only for registered users OPEN DOC
  • Pages:
  • Word count: 361
  • Category: cost labor

A limited time offer!

Get a custom sample essay written according to your requirements urgent 3h delivery guaranteed

Order Now

Broadening Your perspective Essay Sample

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. 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.

(a) Calculate the estimated break-even point in annual unit sales of the new product if Martinez Company uses the: Is price in number of units, the number of units should equal the variable cost per unit plus the total fixed cost plus profit (Kimmel, Weygand, & Kieso, 2011, Ch 18.).

1. Capital-intensive manufacturing method. The break-even point for a capital intensive method would 92,888. 2. Labor-intensive manufacturing method. The break-even point for the labor intensive method would be achieved at 62,775 (b) Determine the annual unit sales volume at which Martinez Company would be indifferent between the two manufacturing methods. The Annual unit sales volume at which Martinez Company would be indifferent between the capital-intensive manufacturing method and the labor-intensive manufacturing method is $970.000.

(c) Explain the circumstance under which Martinez should employ each of the two manufacturing methods. (CMA adapted) If the Martinez Company would have the lowest manufacturing cost as well as the lowest variable cost, fixed cost and direct labor cost than implementing the Capital-intensive manufacturing method. This method will also provide the highest cost saving and highest potential cost savings. The labor-intensive methods do not readily adopt to change in the company’s production. Capital-intensive method can however, easily be adjusted to suit modern trends in production due to their flexibility. (Kimmel, Weygandt, & Kieso, 2011, Ch 18.).

References

Kimmel, P. D., Weygandt, J. J., & Kieso, D. E. (2011). Accounting: Tools for business decision making (4th ed.). NJ: John Wiley & Sons.

We can write a custom essay

According to Your Specific Requirements

Order an essay
Get Access To The Full Essay
icon
300+
Materials Daily
icon
100,000+ Subjects
2000+ Topics
icon
Free Plagiarism
Checker
icon
All Materials
are Cataloged Well

Sorry, but copying text is forbidden on this website. If you need this or any other sample, we can send it to you via email.

By clicking "SEND", you agree to our terms of service and privacy policy. We'll occasionally send you account related and promo emails.
Sorry, but only registered users have full access

How about getting this access
immediately?

Become a member

Your Answer Is Very Helpful For Us
Thank You A Lot!

logo

Emma Taylor

online

Hi there!
Would you like to get such a paper?
How about getting a customized one?

Can't find What you were Looking for?

Get access to our huge, continuously updated knowledge base

The next update will be in:
14 : 59 : 59
Become a Member