IvanhoeCompany has decided to introduce a new product. The new product can be manufactured by either a
Question:
IvanhoeCompany 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-IntensiveLabor-IntensiveDirect materials$4.30per unit$4.80per unitDirect labor$5.16per unit$7.16per unitVariable overhead$2.58per unit$4.08per unitFixed manufacturing costs$2,169,680$1,322,832
Ivanhoe' market research department has recommended an introductory unit sales price of $27.52. The incremental selling expenses are estimated to be $414,448annually plus $1.72for each unit sold, regardless of manufacturing method.
Answer the following.
Calculate the estimated break-even point in annual unit sales of the new product ifIvanhoeCompany uses the:
1.Capital-intensive manufacturing method.2.Labor-intensive manufacturing method.