Reference no: EM13889362
Creative Ideas Company has decided to introduce a new product. The new product can be manufactured by either a capital-intensive method or a labor-intensive method. The manufactur- ing method will not affect the quality of the product. The estimated manufacturing costs by the two methods are as follows.
|
Capital-Intensive
|
Labor- Intensive
|
|
Direct materials
|
$5 per unit
|
$5.50 per unit
|
|
Direct labor
|
$6 per unit
|
$8.00 per unit
|
|
Variable overhead
|
$3 per unit
|
$4.50 per unit
|
|
Fixed manufacturing costs
|
$2,524,000
|
$1,550,000
|
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 manufac- turing methods.
|
Meaning to the imaginary roots of the irr equation
: In your own simple words, compare the usefulness of the IRR rule and NPV rule for capital budgeting decisions. Explain how they are connected and outline how to give meaning to the imaginary roots of the IRR equation.
|
|
Withdraws upon retirement is a growing annuity
: Assume that your father is now 50 years old, that he plans to retire in 10 years, and that he expects to live for 25 years after he retires - that is, until he is 85. He wants his first retirement payment to have the same purchasing power at the time..
|
|
New firm specializing in digital switching systems
: A financial advisor at Diehl Investments identified two companies that are likely candidates for a takeover in the near future. Eastern Cable is a leading manufacturer of flexible cable systems used in the construction industry, and ComSwitch is a ne..
|
|
International company operates four factories
: The Thor International Company operates four factories that ship products to five warehouses.
|
|
Calculate the estimated break-even point in annual unit sale
: Calculate the estimated break-even point in annual unit sales of the new product if Creative Ideas Company uses the. Capital-intensive manufacturing method.
|
|
State space representation of the system
: Find a new state space representation of the system by diagonalizing the system matrix A. Is the system controllable?
|
|
How much are investors paying for option to buy piglet share
: Piglet Pies has issued a zero-coupon 12-year bond that can be converted into 10 Piglet shares. Comparable straight bonds are yielding 10%. Piglet stock is priced at $62 a share. Suppose that you had to make a now-or0never decision on whether to conve..
|
|
Discuss the supply-chain implications of retailers
: Discuss the supply-chain implications of retailers having low inventory-to-sales ratios if the inventory-to-sales ratios of manufactures and wholesalers are high
|
|
What rate did sales grow
: Sales for Hanebury Corporation's just-ended year were $10 million. Sales were $5 million 4 years earlier. At what rate did sales grow? Round your answer to the nearest whole.
|