**Crane Company's New Manufacturing Method Evaluation**Crane 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 for each method are illustrated in the following table:| Cost Elements | Capital-Intensive | Labor-Intensive ||-------------------------|--------------------------|------------------------|| Direct materials | $6.00 per unit | $7.00 per unit || Direct labor | $7.00 per unit | $10.00 per unit || Variable overhead | $4.00 per unit | $5.50 per unit || Fixed manufacturing costs| $3,200,000 | $2,028,500 |The market research department recommends an introductory unit sales price of $40.00. Selling expenses are estimated at $622,000 annually plus $2.00 for each unit sold, regardless of the manufacturing method.**Break-even Analysis***(a)* Calculate the estimated break-even point in annual unit sales of the new product if Crane Company uses the following methods:1. **Capital-intensive manufacturing method.**2. **Labor-intensive manufacturing method.**The break-even points are presented in the table below:| Method | Break-even Point in Units ||-------------------------|---------------------------|| Capital-Intensive | 182,000 || Labor-Intensive | 171,000 |**Indifference Point Analysis***(b)* Determine the annual unit sales volume at which Crane Company would be indifferent between the two manufacturing methods:| Annual Unit Sales Volume| ||-------------------------|---------------------------|This point is where the total costs of both methods would be equal, meaning that the company would not benefit more from one method over the other at this specific sales volume.**Graph and Diagrams**The provided image does not contain any graphs or diagrams. The information has been organized into tables for easier readability and understanding.

Break even point is the optimum point of No profit no loss as at this point the firm is earning a…

Answered: Crane Company has decided to introduce…

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter11: Strategic Cost Management

Section: Chapter Questions

Problem 12E: The following series of statements or phrases are associated with product life-cycle viewpoints....

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Carla Vista 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: Capital-Intensive Labour-Intensive Direct materials $5.50 per unit $10.75 per unit Direct labour $4.00 per unit $9.00 per unit Variable overhead $3.50 per unit $7.25 per unit Fixed manufacturing costs $2,423,040 $1,488,000 Carla Vista's market research department has recommended an introductory unit sales price of $32. The incremental selling expenses are estimated to be $481,920 annually, plus $2 for each unit sold, regardless of the manufacturing method. (a) * Your answer is incorrect. Calculate the estimated break-even point in annual unit sales of the new product if Carla Vista Company uses (1) the capital- intensive manufacturing method, or (2) the labour-intensive manufacturing method.
Carla Vista 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: Capital-Intensive Labour-Intensive Direct materials $5.50 per unit $10.75 per unit Direct labour $4.00 per unit $9.00 per unit Variable overhead $3.50 per unit Fixed manufacturing costs $2,423,040 $7.25 per unit $1,488,000 Carla Vista's market research department has recommended an introductory unit sales price of $32. The incremental selling expenses are estimated to be $481,920 annually, plus $2 for each unit sold, regardless of the manufacturing method. (a) Your Answer Correct Answer (Used) Your answer is partially correct. Calculate the estimated break-even point in annual unit sales of the new product if Carla Vista Company uses (1) the capital- intensive manufacturing method, or (2) the…
Mozaic Inc. has decided to introduce a new product, which can be manufactured by either a computer-assisted manufacturing system (CAM) or a labor-intensive production system (LIP). The manufacturing method will not affect the quality of the product. The estimated manufacturing costs by the two methods are as follows: www CAM System LIP System Direct Material $5.00 $5.60 Direct Labor (DLH) 0.5 DLH x $12 $6.00 0.8 DLH x $9 $7.20 Variable Overhead 0.5 DLH x $6 $3.00 0.8 DLH x $6 $4.80 Fixed Overhead* $2,440,000 $1,320,000 * 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 $30. Selling expenses are estimated to be $500,000 annually plus $2 for each unit sold. (Ignore income taxes.) Required: 1. Describe the circumstances under which the firm should employ each of the two manufacturing methods. 2. Identify some business…
Knowledge Check 01 Which of the following factors should be considered when deciding whether to keep a product line or drop it? (Select all that apply) Check All That Apply Opportunity costs of using the production facility currently being used for the product line Revenues generated by the product line Variable costs incurred in manufacturing the product Direct fixed costs associated with the product line Common fixed costs allocated to the product line Research and development costs spent on designing the product line
Mozaic Inc. has decided to introduce a new product, which can be manufactured by either a computer-assisted manufacturing system (CAM) or a labor-intensive production system (LIP). The manufacturing method will not affect the quality of the product. The estimated manufacturing costs by the two methods are as follows: CAM System LIP System Direct Material $5.00 $5.60 Direct Labor (DLH) 0.5 DLH x $12 $6.00 0.8 DLH x $9 $7.20 Variable Overhead 0.5 DLH x $6 $3.00 0.8 DLH x $6 $4.80 Fixed Overhead* $2,440,000 $1,320,000 * 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 $30. Selling expenses are estimated to be $500,000 annually plus $2 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…
b) Paste Corporation has established new plant for the production of new product called “Diazinon”. There are two different manufacturing methods available to produce Diazinon. Either by using a process or an order base method. The assembling technique won't influence the quality or deals of the item. The evaluated manufacturing expenses of the two strategies are as per the following:Process base Order baseVariable manufacturing cost per unit..................... Rs14.00 Rs.17.60Fixed manufacturing cost per year ......................Rs. 2,440,000 Rs. 1,320,000 The organization's statistical surveying office has suggested an initial selling cost of Rs.35 per unit for Diazinon. The yearly fixed selling and admin costs of the Diazinon are Rs.500, 000. The variable selling and regulatory costs are Rs. 2 per unit. Required: I. CM ratio and variable expenses ratio. If Paste Corporation uses the:1. Process base manufacturing method.2. Order base manufacturing method.II. Break-even point in…
Accounting Evman Company has decided to introduce a new product, which can be manufactured by either a computer-assisted manufacturing system or a labour-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 system labour-intensive production system Direct Material $5.00 $5.60 Direct Labour .5DLH @ $12 $6.00 .8 DLH @ $9 $7.20 Variable Overhead .5 DLH @ $6 $3.00 .8 DLH @ $6 $4.80 Fixed Overhead * $2,440,000 $1,320,000 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 sales price of $30. Selling expenses are estimated to be $500,000 annually plus $2 for each unit…
Accounting Evman Company has decided to introduce a new product, which can be manufactured by either a computer-assisted manufacturing system or a labour-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 system labour-intensive production system Direct Material $5.00 $5.60 Direct Labour .5DLH @ $12 $6.00 .8 DLH @ $9 $7.20 Variable Overhead .5 DLH @ $6 $3.00 .8 DLH @ $6 $4.80 Fixed Overhead * $2,440,000 $1,320,000 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 sales price of $30. Selling expenses are estimated to be $500,000 annually plus $2 for each unit…
You have been asked by management to classify the costs associated with the start-up of this new product line. Using the cost information provided below, classify each cost under the appropriate heading according to the chart provided below. Note that some costs may be classified under more than one heading. For example, a cost may be a fixed cost and a period cost. Name of cost Variable Cost Fixed Cost Direct Materials Direct Labor Factory Overhead Period Cost Prime Cost Conversion Cost Carlson “New Product” Cost Information Cost Amount Cost Type Depreciation on Building (annual) $ 10,000 Direct Labor Cost (per unit) $ 75 Direct Materials Cost (per unit) $ 60 Factory Utilities (per unit) $ 8 Indirect Materials (per unit) $ 4 Interest on Investments (annual) $3,000 Machinery Rental (monthly) $ 6,000 Marketing (annual) $ 35,000 Rent from Tenant (annual) $40,000…
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.
Select a manufacturing organization for justifying“Companies with labor incentive manufacturing processes are most likely to benefit from sendingmanufacturing operations overseas because the bulk of potential cost savings relate to labor costs”.Q1. Identify relevant and irrelevant costs and benefits in a decision?Q2. Prepare an analysis showing whether a product line or other business segment should be addedor dropped?Q3. Determine the value of obtaining constrained resources?
4 Step 1: You are provided data on costs related to alternative of using neighboring factory off-time capacity to continue manufacturing during the rebuilding time. Classify the data into fixed and variable costs. Step 2: Additionally, calculate economic profit or loss of focusing entirely on rebuilding in comparison to alternative of rebuilding while continue with offsite production?

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