Must be original
Must be original
Must be original
Must be original
See attached doc, for Profess Ryan only
DECISION MAKING ACROSS THE ORGANIZATION
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 per unit
$5.50 per unit
Direct labor
$6 per unit
$8.00 per unit
Variable overhead
$3 per unit
$4.50 per unit
Fixed manufacturing costs
$2,508,000
$1,538,000
Martinez’s market research department has recommended an 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.
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