WileyPLUS Assignment Paper Exercise 18 
Broadening Your Perspective 18-1
Mariea Pack-Elder
ACC/561
December 14, 2014
George Bray
Exercise 18.1
In this paper the Broadening Your Perspective Exercise 18.1 is completed. The exercise is about Martinez Company that has decided to introduce a new product to its product line (John Wiley & Sons, Inc. 2011). Two methods are evaluated to determine what is the best method to use either capital-intensive or labor-intensive method.
Exercise 18-1 A
In this part of the exercise the break-even point in annual unit sales of the new product is calculated for the capital intensive manufacturing method and labor-intensive manufacturing method (John Wiley & Sons, Inc. 2011). To calculate the break-even point the total fixed cost has to be computed first. For the capital-intensive method the total fixed cost is fixed Manufacturing cost-2508000 plus incremental selling expenses of 502000 equaling 3010000. The next step is to find the contribution margin per unit. For the capital-intensive method the contribution margin per unit is calculated by the selling price of 30.00 minus the variable cost of direct materials-5, direct labor-6, variable overhead-3, annual expense-2, thus equaling $14.00. Then the break-even point in unit sales for the capital-intensive method is calculated by the total fixed cost-3010000 divided by the contribution margin per unit of 14, thus equally the break-even point in unit sales for the capital-intensive method is 215000 units. Next we calculate the labor-intensive method. To calculate the break-even point the total fixed cost has to be computed first. For the labor-intensive method the total fixed cost is fixed manufacturing cost-1538000 plus incremental selling expenses of 502000 equaling 2040000. The next step is to find the contribution margin per unit. For the labor-intensive method the contribution margin per unit is calculated by the selling price of 30.00 minus the variable cost of direct materials-5.50, direct
Mariea Pack-Elder
ACC/561
December 14, 2014
George Bray
Exercise 18.1
In this paper the Broadening Your Perspective Exercise 18.1 is completed. The exercise is about Martinez Company that has decided to introduce a new product to its product line (John Wiley & Sons, Inc. 2011). Two methods are evaluated to determine what is the best method to use either capital-intensive or labor-intensive method.
Exercise 18-1 A
In this part of the exercise the break-even point in annual unit sales of the new product is calculated for the capital intensive manufacturing method and labor-intensive manufacturing method (John Wiley & Sons, Inc. 2011). To calculate the break-even point the total fixed cost has to be computed first. For the capital-intensive method the total fixed cost is fixed Manufacturing cost-2508000 plus incremental selling expenses of 502000 equaling 3010000. The next step is to find the contribution margin per unit. For the capital-intensive method the contribution margin per unit is calculated by the selling price of 30.00 minus the variable cost of direct materials-5, direct labor-6, variable overhead-3, annual expense-2, thus equaling $14.00. Then the break-even point in unit sales for the capital-intensive method is calculated by the total fixed cost-3010000 divided by the contribution margin per unit of 14, thus equally the break-even point in unit sales for the capital-intensive method is 215000 units. Next we calculate the labor-intensive method. To calculate the break-even point the total fixed cost has to be computed first. For the labor-intensive method the total fixed cost is fixed manufacturing cost-1538000 plus incremental selling expenses of 502000 equaling 2040000. The next step is to find the contribution margin per unit. For the labor-intensive method the contribution margin per unit is calculated by the selling price of 30.00 minus the variable cost of direct materials-5.50, direct