Breakeven Analysis Candice Company has decided to introduce a new product. The new product can be manufactured by either a capital intensive method or 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.

Candice's market research department has recommended an introductory unit sales price of \(\$ 30\). The incremental selling expenses are estimated to be \(\$ 500,000\) annually plus \(\$ 2\) for each unit sold regardless of manufacturing method.
Required:

(a) Calculate the estimated breakeven point in annual unit sales of the new product if Candice Company uses the:
1. capital intensive manufacturing method.
2. labor intensive manufacturing method.

(b) Determine the annual unit sales volume at which Candice Company would be indifferent between the two manufacturing methods.

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Capital Intensive Labor Intensive Raw Materials.. $5.00 $5.60 Direct Labor................ .5DLH @ $12 $6.00 .8DLH @ $12 $7.20 Variable Overhead.... .5DLH @ $6 $3.00 .8DLH @ $6 $4.80 Directly Traceable incremental fixed manufacturing costs......... $2,440,000 $1,320,000