LO3, 5 Newell Brands NASDAQ: NW. MIC E15-21. Alternative Production Procedures and Operating Leverage Assume Sharpie, a brand of Newell Brands, 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. Fixed manufacturing overhead per year... Capital Intensive Labor Intensive $10.00 $12.00 $ 4.00 $12.00 $ 5.00 $ 2.00 $1,800,000 $500,000 Sharpie's market research department has recommended an introductory unit sales price of $100. Selling costs under either method are predicted to be $250,000 per year, plus $4 per unit sold. REQUIRED a. Determine the annual break-even point in units if Sharpie uses the 1. Capital-intensive manufacturing method. 2. Labor-intensive manufacturing method. b. Determine the annual unit volume at which Sharpie is indifferent between the two manufac- turing methods. c. Management wants to know more about the effect of each alternative on operating leverage. 1. Explain operating leverage and the relationship between operating leverage and the vola- tility of earnings. 2. Compute operating leverage for each alternative at a volume of 100,000 units. 3. Which alternative has the higher operating leverage? Why? >