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Hi, Need your help to solve below ACCT 6202 prblem. Please show steps. I put screen shot and text version of problem John Products. Inc.
Hi,
Need your help to solve below ACCT 6202 prblem. Please show steps. I put screen shot and text version of problem
John Products. Inc. has decided to introduce a new product, which can be manufactured by either a computerassisted manufacturing system or a laborintensive production system. The manufacturing method will not affect the quality of the product. The estimated manufacturing costs by the two methods are as follows: ComputerAssisted Manufactunng LaborIntensive Production System System Direct Material $?.00 $8.50 Direct Labor (DLH denotes directlabor hours) 0.5DLH@$18 $9.00 0.8DLH@$14 $11.20 Variable mfg. overhead (applied based on DLH) 0.5DLH@$16 $8.00 0.8DLH@$16 $12.80 Fixed mfg. overhead' $3,250,000 $2,500.000 * These costs are directly traceable to the new product line and they would not be incurred if the new product were not produced. The company's market research department has recommended an introductory unit sales price of $60.00. Selling expenses are estimated as $800,000 annually plus $4.00 for each unit sold. Required: (Round up all numbers to the next higher digit in case of breakeven volumes and round up to the nearest integer in other cases.) a) Calculate the estimated breakeven point (in annual sales volume in units) of the new product if the compnay uses the (i) ComputerAssisted Manufacturing System; (ii) LaborIntensive Production System. b)Estimate the number of units that John Products should sell to earn an aftertax prot of $2.48 million under (i) ComputerAssisted Manufacturing System (ii) LaborIntensive Production System. Assume an incometax rate of 30% c) Determine the annual sales volume (in units) at which the rm would be indifferent (if prot maximization is the objective) between choosing between the two manufacturing methods. Justify your answer with appropriate calculations. For the toolbar, press ALT+F10 (PC) or ALT+FN+F10 (Mac)Step by Step Solution
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