Creative Ideas 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 $6 per unit $6.50 per unit Direct labor $7 per unit $9.00 per unit Variable overhead $3 per unit $5.00 per unit Fixed manufacturing costs $2,877,000 $1,767,000

Creative Ideas market research department has recommended an introductory unit sales price of $36. The incremental selling expenses are estimated to be $572,000 annually plus $2 for each unit sold, regardless of manufacturing method. With the class divided into groups, answer the following. (a) Calculate the estimated break-even point in annual unit sales of the new product if Creative Ideas Company uses the: (Round answers to 0 decimal places, e.g. 5,275.)

(1) Capital-intensive manufacturing method. (2) Labor-intensive manufacturing method.

Capital-Intensive Labor-Intensive Break-even point in units

(b) Determine the annual unit sales volume at which Creative Ideas Company would be indifferent between the two manufacturing methods. (Round answer to 0 decimal places, e.g. 5,275.)

Annual unit sales volume ____________ units