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Decision Making Across the Organization - Essay Example
Author : wilkinsonrussel
Finance & Accounting
Pages 3 (753 words)
Decision Making Across the Organization Name: Institution: Course: Tutor: 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. Capital intensive manufacturing method entail a method of production that requires large amounts of capital investments to produce goods and services…
Therefore, Martinez Company may use this method to determine the break-even point in annual unit sales of the new product. The break even points may be computed as follows; if 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. Therefore, it is vital to note that the incremental and $2 are irrelevant cost in this case because irrespective of their presence they may not affect organisation decision making (Weygandt, Kieso, & Kimmel, 2010) Variable cost Direct materials $5 per unit Direct labor $6 per unit Variable overhead $3 per unit Total Variable Cost $14 Fixed Cost Fixed manufacturing costs $2,508,000 Break Even Point= Fixed Costs Price-Variable Cost per Unit Break Even Point=$2508, 000=156750Unit $30-14 (2) Labor-intensive manufacturing method. Labor intensive method entails a production method that utilizes more labor and little capital to produce substantial amounts of goods and services. Under this method, a lot of task might be involved and therefore, substantial amount of salary expense incurred (Weygandt, Kieso & Kimmel, 2010). ...
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