Required information

Skip to question

[The following information applies to the questions displayed below.]

Celestial Products, Inc., has decided to introduce a new product, which can be manufactured by either a computer-assisted manufacturing system or a labor-intensive production system. The manufacturing method will not affect the quality of the product. The estimated manufacturing costs by the two methods are as follows:

Computer-Assisted

Manufacturing SystemLabor-Intensive

Production SystemDirect material$8.40$9.30Direct labor (DLH denotes direct-labor hours)0.5DLH @ $22.5011.250.8DLH @ $18.0014.40Variable overhead0.5DLH @ $13.506.750.8DLH @ $13.5010.80Fixed overhead*$4,110,000$2,430,000

*These costs are directly traceable to the new product line. They would not be incurred if the new product were not produced.

The company's marketing research department has recommended an introductory unit sales price of $63.00. Selling expenses are estimated to be $840,000 annually plus $3.90 for each unit sold. (Ignore income taxes.)

Required:

1.Calculate the estimated break-even point in annual unit sales of the new product if the company uses the (a) computer-assisted manufacturing system; (b) labor-intensive production system.(Do not round intermediate calculations. Round your final answers to the nearest whole number.)