Question: please show work to get the answer. Alternative Production Procedures and Operating Leverage Assume Sharpie, a brand of Newell Brands, is planning to introduce a
Alternative Production Procedures and Operating Leverage 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: LO3, 5 Newell Brands (NWL) Sharpie's market research department has recommended an introductory unit sales price of $100. Selling costs under either method are predicted to be $250,000 per year, plus $4 per unit sold. Required a. Determine the annual break-even point in units if Sharpie uses the 1. Capital-intensive manufacturing method. 2. Labor-intensive manlufacturing method. b. Determine the annual unit volume at which Sharpie is indifferent between the two manufacturing methods. 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 eamings. 2. Compute operating leverage for each alternative at a volume of 100,000 units. 3. Which alternative has the higher operating leverage? Why
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