Required

(appendix) Basic CVP relationships; cost structure; operating leverage Zodiac 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 manufacturing costs relating to the two methods are as follows: P18.42 Labour-intensive production systenm Computer-assisted manufacturing system Direct material per unit Direct labour per unit Variable overhead per unit Fixed overhead DLH refers to direct labour hours worked. These costs are directly traceable to the new product line. They would not be incurred if the new product line were not produced $8.40 10.80 7.20 $1 980 000 $7.50 9.00 4.50 $3 660 000 0.8 DLH x $13.50 0.8 DLH $9.00 0.5 DLH x $18.00 0.5 DLH x $9.00 The company's marketing research department has recommended an introductory unit sales price of $45. Selling expenses are estimated to be $750 00o annually, plus $3 for each unit sold. (Ignore income taxes.)