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ACC 561 Week 5 byp 18-1 Decision Making Across the Organization PaperScholar Study Aids
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ACC 561 Week 5 byp 18-1 Decision Making Across the Organization

ACC 561 Week 5 byp 18-1 Decision Making Across the Organization


Broadening Your Perspective 18-1 activity titled “Decision Making Across the Organization” in Ch. 18 of Accounting.

Martinez company 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-intensive labor-intensive
direct materials $5.00 per unit $5.50 per unit
direct labor $6.00 per unit $8.00 per unit
variable overhead $3.00 per unit $4.50 per unit
fixed manufacturing costs $2,508,000 $1,538,000

Martinez market research department has recommended introductory unit sales price of $30. The incremental selling expenses are estimated to be $502,000 annually plus $2 for each unit sold, regardless of manufacturing method.

instructions
with the class divided into groups, answer the following.

A. Calculate the estimated breakeven point in annual unit sales of the new product is Martinez company uses the (one) capital-intensive manufacturing method (two) labor-intensive manufacturing method.

B. Determine annual unit sales volume at which Martinez company would be in different between the two manufacturing methods.

C. Explain the circumstances under which Martinez should employ each of the two manufacturing methods.