Crane 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 $10.00 per unit $12.00 per unit $6.00 per unit $2,624,960 Labour-Intensive $11.00 per unit $16.00 per unit $9.00 per unit $1,612,000 Crane's market research department has recommended an introductory unit sales price of $64. The incremental selling expenses are estimated to be $522,080 annually, plus $4 for each unit sold, regardless of the manufacturing method.
Crane 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 $10.00 per unit $12.00 per unit $6.00 per unit $2,624,960 Labour-Intensive $11.00 per unit $16.00 per unit $9.00 per unit $1,612,000 Crane's market research department has recommended an introductory unit sales price of $64. The incremental selling expenses are estimated to be $522,080 annually, plus $4 for each unit sold, regardless of the manufacturing method.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Transcribed Image Text:Crane 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
$10.00 per unit
$12.00 per unit
$6.00 per unit
$2,624,960
Labour-Intensive
$11.00 per unit
$16.00 per unit
$9.00 per unit
$1,612,000
Crane's market research department has recommended an introductory unit sales price of $64. The incremental selling expenses are
estimated to be $522,080 annually, plus $4 for each unit sold, regardless of the manufacturing method.
Transcribed Image Text:Calculate the estimated break-even point in annual unit sales of the new product if Crane Company uses (1) the capital-intensive
manufacturing method, or (2) the labour-intensive manufacturing method.
Break-even point
(1)
Capital-intensive manufacturing method
eTextbook and Media
Annual sales volume
units
Determine the annual unit sales volume at which there would be no difference between methods.
(2)
Labour-intensive manufacturing method
units
units
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VIEWStep 5: Computation of Breakeven Point of New Product in Units:
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