Alternative Production Procedures and Operating Leverage

Assume Paper Mate is planning to introduce a new executive pen that can be manufactured using either a capital-intensive method or a labor-intensive method. the predicted manufacturing costs for each method are as follows:

Alternative Production Procedures and Operating Leverage Assume Paper Mate is planning to introduce a new executive pen that can be manufactured using either a capital-intensive method or a labor-intensive method. The predicted manufacturing costs for each method are as follows: Direct materials per unit Direct labor per unit Variable manufacturing overhead per unit Flxed manufacturing overhead per year Capital Intensive Labor Intensive $6.00 $13.00 $2.00 $780,000.00 $5.00 $5.00 $5.00 $2,580,000.00 Paper Mate's market research department has recommended an introductory unit sales price of $31. The incremental selling costs are predicted to be $500,000 per year, plus $2 per unit sold. (a) Determine the annual break-even point in units if Paper Mate uses the 1. Capital-intensive manufacturing method. 0 units 2. Labor-intensive manufacturing method 0 units (b) Determine the annual unit volume at which Paper Mate is indifferent between the two manufacturing methods. 0 units