Assume Sharpie, a brand of Newell Brands, is planning to introduce a new executive pen that...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Assume Sharpie, a brand of Newell Brands, is planning to introduce a new executive pen that can be manufactured using either a capital-intensive method or a labor-intensive method. The predicted manufacturing costs for each method are as follows: Capital Intensive Labor Intensive Direct materials per unit $ 10.00 $ 12.00 Direct labor per unit $ 4.00 $ 12.00 Variable manufacturing overhead per unit $ 5.00 $ 2.00 Fixed manufacturing overhead per year $ 1,800,000 $ 500,000 Sharpie's market research department has recommended an introductory unit sales price of $100. The incremental selling costs are predicted to be $250,000 per year, plus $4 per unit sold. (a) Determine the annual break-even point in units if Sharpie uses the: 1. Capital-intensive manufacturing method. units 2. Labor-intensive manufacturing method. units (b) Determine the annual unit volume at which Sharpie is indifferent between the two manufacturing methods. units (C) Management wants to know more about the effect of each alternative on operating leverage. 1. Explain operating leverage and the relationship between operating leverage and the volatility of earnings. OThey have little or no correlation because they are unrelated. OThey are positively correlated, with increases in operating leverage accompanied by increases in the volatility of earnings. OThey are negatively correlated, with increases in operating leverage accompanied by decreases in the volatility of earnings. 2. Compute operating leverage for each alternative at a volume of 100,000 units. Round your answers two decimal places. Capital-Intensive operating leverage 0 Labor-Intensive operating leverage 0 3. Which alternative has the higher operating leverage? Why? OThe labor intensive method has a higher operating leverage because of higher variable conversion costs. OThe labor intensive method has a higher operating leverage because of lower variable manufacturing overhead. OThe capital intensive method has a higher operating leverage because of the greater use of fixed assets. OThe capital intensive method has a higher operating leverage because of the higher variable manufacturing overhead. Assume Sharpie, a brand of Newell Brands, is planning to introduce a new executive pen that can be manufactured using either a capital-intensive method or a labor-intensive method. The predicted manufacturing costs for each method are as follows: Capital Intensive Labor Intensive Direct materials per unit $ 10.00 $ 12.00 Direct labor per unit $ 4.00 $ 12.00 Variable manufacturing overhead per unit $ 5.00 $ 2.00 Fixed manufacturing overhead per year $ 1,800,000 $ 500,000 Sharpie's market research department has recommended an introductory unit sales price of $100. The incremental selling costs are predicted to be $250,000 per year, plus $4 per unit sold. (a) Determine the annual break-even point in units if Sharpie uses the: 1. Capital-intensive manufacturing method. units 2. Labor-intensive manufacturing method. units (b) Determine the annual unit volume at which Sharpie is indifferent between the two manufacturing methods. units (C) Management wants to know more about the effect of each alternative on operating leverage. 1. Explain operating leverage and the relationship between operating leverage and the volatility of earnings. OThey have little or no correlation because they are unrelated. OThey are positively correlated, with increases in operating leverage accompanied by increases in the volatility of earnings. OThey are negatively correlated, with increases in operating leverage accompanied by decreases in the volatility of earnings. 2. Compute operating leverage for each alternative at a volume of 100,000 units. Round your answers two decimal places. Capital-Intensive operating leverage 0 Labor-Intensive operating leverage 0 3. Which alternative has the higher operating leverage? Why? OThe labor intensive method has a higher operating leverage because of higher variable conversion costs. OThe labor intensive method has a higher operating leverage because of lower variable manufacturing overhead. OThe capital intensive method has a higher operating leverage because of the greater use of fixed assets. OThe capital intensive method has a higher operating leverage because of the higher variable manufacturing overhead.
Expert Answer:
Answer rating: 100% (QA)
Question a 1 Capital Incentive manufacturing method 2662338 or 26623 Units 2 Labor Incentive manufac... View the full answer
Related Book For
Basic Marketing Research
ISBN: 978-1133188544
8th edition
Authors: Tom J. Brown, Tracy A. Suter, Gilbert A. Churchill
Posted Date:
Students also viewed these accounting questions
-
A retailer of household appliances is planning to introduce a new brand of dishwashers to the local market and wishes to estimate demand for the product. He has decided to use two stage area sampling...
-
The XYZ Company is planning to introduce a new product line and will build a new factory to produce the parts and assembly the final products for the product line. The new product line will include...
-
The marketing department of Hercules Ltd. is planning to introduce a new product called H-5. The product details are as follows: Based on the market considerations, the target selling price per unit...
-
What is the time value of money? Including present and future value. How would a financial expert interpret it?
-
What are some of the features on a NC machining center used to reduce nonproductive time in the work cycle?
-
Explain the technical difference between a cross-fertilization experiment and a self-fertilization experiment.
-
An ideal gas flows within a small diameter tube. Derive an expression for the transition density of the gas \(ho_{c}\) below which microscale effects must be accounted for. Express your result in...
-
The general manager of a Major League Baseball team believes the ages of purchasers of game tickets are normally distributed. The following data represent the distribution of ages for a sample of...
-
Two thin-walled aluminum ( G = 26 GPa) extrusions are to be loaded in simple torsion with T = 900 N-m. Extrusion A is a simple hollow rectangular tube of uniform wall thickness. Extrusion B is...
-
Wesco Incorporateds only product is a combination fertilizer/weedkiller called GrowNWeed. GrowNWeed is sold nationwide to retail nurseries and garden stores. Zwinger Nursery plans to sell a similar...
-
Six Degrees of Kevin Bacon, or Bacon's Law, is a game that became popular, stating that if you choose any actor and then connect them to another actor in a film they share, you can do this and find a...
-
At the end of the current fiscal year, ABC Corporation had the following balances: Assets $50,000 Common Stock $30,000 Dividends Declared $5,000 Expenses $75,000 Liabilities $20,000 Revenues $90,000...
-
9.25 A rectangular weir is to be placed in a 6-m-wide channel to measure a nominal flow rate of 5.0 m/s while maintaining a minimal channel depth of 3.0 m. Determine a suitable rectangular weir...
-
XYZ Corporation is a research and development company focusing on energy industry process development. To facilitate research efforts, XYZ management decided to purchase a new test rig. XYZ had the...
-
The following costs and inventory data were taken from the accounts of Winsto Company fo Inventories: Raw materials Work in process Finished goods Costs incurred: W 1-Jan-22 31-Dec-22 $8,000 $7,000...
-
A leased a building to B for a ten-year term at an annual rental of 200,000. At the inception of the lease, A received 800,000, which covered the first two years of rent of 400,000 and a security...
-
You deposit $10,000 today and withdraw $R at the end of every 6-month period for 5 years. If the interest rate is j1 = 12%, what is R?
-
The Heese Restaurant Group manufactures the bags of frozen French fries used at its franchised restaurants. Last week, Heeses purchased and used 101,000 pounds of potatoes at a price of $ 0.70 per...
-
Make the necessary corrections to the above questions. a. Which of the following magazines do you read regularly? Time Fortune Bloomberg Businessweek b. Are you a frequent purchaser of Great Value...
-
You have been asked to conduct a survey of graduating seniors at your school about their plans following graduation. Very little money is available to support the research, and your client has asked...
-
Describe the information that should be contained in the executive summary, and discuss why this is the most important part of the research report.
-
With diverse patient populations come language translation issues. Medical interpretation is a challenge facing most health organizations. Medical interpretation and translation services are costly....
-
Visit the Hofstede Centre (https://geerthofstede.com/culture-geerthofstede- gert-jan-hofstede/6d-model-of-nationalculture/) and review the scores by country for the various cultural dimensions that...
-
You have been asked to join the hospitals task force for developing a plan to increase the organizations workforce diversity from its current 20% level to 40% over the next 5 years. How does your...
Study smarter with the SolutionInn App