Question 5 Partially correct Mark 6.00 out of 7.00 P Rag question 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 u Capital Intensive Labor Intensive Direct materials per unit $10.00 $12.00 Direct labor per unit $4.00 $12.00 Variable manufacturing overhead per unit $5.00 52.00 Fixed manufacturing overhead per year $1,800,000 $ 500.000 Sharple's market research department has recommended an introductory unit sales price of $100. The incremental selli (a) Determine the annual break-even point in units if Sharple uses the Note: Round both answers Up to the nearest whole number. 1. Capital-Intensive manufacturing method. 26,623 units 2. Labor-intensive manufacturing method. * units 1.12 (b) Determine the annual unit volume at which Sharpie is indifferent between the two manufacturing methods. Note: Round answer Up to the nearest whole number. 185,714 units (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 volatility of earnings They have little or no correlation because they are unrelated They are positively correlated with increases in operating leverage accompanied by increases in the volatility of earnings. 103 Question 5 Partially correct Mark 6.00 out of 7.00 P Rag question 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 u Capital Intensive Labor Intensive Direct materials per unit $10.00 $12.00 Direct labor per unit $4.00 $12.00 Variable manufacturing overhead per unit $5.00 52.00 Fixed manufacturing overhead per year $1,800,000 $ 500.000 Sharple's market research department has recommended an introductory unit sales price of $100. The incremental selli (a) Determine the annual break-even point in units if Sharple uses the Note: Round both answers Up to the nearest whole number. 1. Capital-Intensive manufacturing method. 26,623 units 2. Labor-intensive manufacturing method. * units 1.12 (b) Determine the annual unit volume at which Sharpie is indifferent between the two manufacturing methods. Note: Round answer Up to the nearest whole number. 185,714 units (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 volatility of earnings They have little or no correlation because they are unrelated They are positively correlated with increases in operating leverage accompanied by increases in the volatility of earnings. 103
