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Sheridan Company has decided to introduce a new product that can be manufactured by either a capital-intensive method or a labour- intensive method. The manufacturing
Sheridan Company has decided to introduce a new product that can be manufactured by either a capital-intensive method or a labour- intensive method. The manufacturing method will not affect the quality of the product. The estimated manufacturing costs under the two methods are as follows: Direct materials Direct labour Variable overhead Fixed manufacturing costs Capital-Intensive Labour-Intensive $10,00 per unit $11.00 per unit $12.00 per unit $16.00 per unit $6.00 per unit $9.00 per urit $2,877,352 $1,767,000 Sheridan's market research department has recommended an introductory unit sales price of $64. The incremental selling expenses are estimated to be $572,280 annually, plus $4 for each unit sold, regardless of the manufacturing method. Calculate the estimated break-even point in annual unit sales of the new product if Sheridan Company uses (1) the capital Intensive manufacturing method, or (2) the labour-intensive manufacturing method, (1) Capital-intensive manufacturing method (2) Labour-intensive manufacturing method units units Break-even point Determine the annual unit sales volume at which there would be no difference between methods. Annual sales volume units
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