Prepare a profit-volume graph for these two methods, and then comment at which levels of activity the one production method would be preferred over the other.
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
|
|
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 |
.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
REQUIRED
Prepare a profit-volume graph for these two methods, and then comment at which levels of activity the one production method would be preferred over the other.
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 1 images
