Creative Ideas Company has decided to introduce a new product. The new product can be manufactured by
Question:
Creative Ideas market research department has recommended an introductory unit sales price of $32. The incremental selling expenses are estimated to be $502,000 annually plus $2 for each unit sold, regardless of manufacturing method.
Instructions
With the class divided into groups, answer the following.
(a) Calculate the estimated break-even point in annual unit sales of the new product if Creative Ideas Company uses the:
(1) Capital-intensive manufacturing method.
(2) Labor-intensive manufacturing method.
(b) Determine the annual unit sales volume at which Creative Ideas Company would be indifferent between the two manufacturing methods.
(c) Explain the circumstance under which Creative Ideas should employ each of the two manufacturing methods.
(CMAadapted)
Step by Step Answer:
Accounting Principles
ISBN: 9781118566671
11th Edition
Authors: Jerry Weygandt, Paul Kimmel, Donald Kieso