BYP18-1 Martinez Company has resolute to begin a odd emanation. The odd emanation can be artful by either a capital-intensive mode or a strive-intensive mode. The manufacturing mode achieve referable move the condition of the emanation. The estimated manufacturing costs by the brace modes are as follows.
Direct materials $5 per ace $5.50 per ace
Direct strive $6 per ace $8.00 per ace
Variable over $3 per ace $4.50 per ace
Fixed manufacturing costs $2,508,000 $1,538,000
Martinez’s trade inquiry line has recommended an initiatory ace sales expense of $30. The incremental selling expenses are estimated to be $502,000 year-by-year plus $2 ce each ace sold, unmindful of manufacturing mode.
(a) Calculate the estimated break-even top in annual ace sales of the odd emanation if Martinez Company uses the:
(1) Capital-intensive manufacturing mode.
(2) Strive-intensive manufacturing mode.
(b) Determine the annual ace sales quantity at which Martinez Company would be lukewarm among the brace manufacturing modes.
(c) Explain the particular beneath which Martinez should accustom each of the brace manufacturing modes.
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