**Pharoah Company: Introduction of a New Product**Pharoah Company has decided to introduce a new product. This product can be manufactured by either a capital-intensive method or a labor-intensive method. The choice of manufacturing method will not affect the product’s quality. The estimated manufacturing costs for these two methods are as follows:| Cost Component | Capital-Intensive | Labor-Intensive ||---------------------------|------------------|----------------|| Direct materials | $4.00 per unit | $4.50 per unit || Direct labor | $5.00 per unit | $7.00 per unit || Variable overhead | $3.00 per unit | $4.00 per unit || Fixed manufacturing costs | $2,284,000 | $1,437,000 |The market research department at Pharoah has suggested an introductory unit sales price of $28.00. Selling expenses are estimated to be $432,000 annually plus $2.00 per unit sold, irrespective of the manufacturing method chosen.**Task (a):***Calculate the estimated break-even point in annual unit sales of the new product if Pharoah Company uses:*1. Capital-intensive manufacturing method.2. Labor-intensive manufacturing method.| | Capital-Intensive | Labor-Intensive ||----------------|-------------------|-----------------|| Break-even point in units | [Input Box] | [Input Box] | --- **Explanation:**This section outlines how to calculate the break-even point depending on the chosen manufacturing method. The break-even point is the number of units that must be sold to cover all associated costs. Each method shows different cost structures that will affect this calculation.

Break even point :— It is the point of production where total cost is equal to total revenue. At…

Pharoah 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. Direct materials Direct labor Variable overhead Fixed manufacturing costs (a) Capital-Intensive $4.00 per unit $5.00 per unit $3.00 per unit $2,284,000 2. Labor-Intensive Pharoah' market research department has recommended an introdu ry unit sales price of $28.00. The selling estimated to be $432,000 annually plus $2.00 for each unit sold, regardless of manufacturing method. Break-even point in units $4.50 per unit $7.00 per unit $4.00 per unit $1,437,000 Calculate the estimated break-even point in annual unit sales of the new product if Pharoah Company uses the: A 1. Capital-intensive manufacturing method. Labor-intensive manufacturing method. Capital-Intensive Labor-Intensive penses ar

Pharoah 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. Direct materials Direct labor Variable overhead Fixed manufacturing costs (a) Capital-Intensive $4.00 per unit $5.00 per unit $3.00 per unit $2,284,000 2. Labor-Intensive Pharoah' market research department has recommended an introdu ry unit sales price of $28.00. The selling estimated to be $432,000 annually plus $2.00 for each unit sold, regardless of manufacturing method. Break-even point in units $4.50 per unit $7.00 per unit $4.00 per unit $1,437,000 Calculate the estimated break-even point in annual unit sales of the new product if Pharoah Company uses the: A 1. Capital-intensive manufacturing method. Labor-intensive manufacturing method. Capital-Intensive Labor-Intensive penses ar

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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