CVP Analysis
Not what you're looking for?
CP has decided to introduce a new product which can be manufactured by either a computer assisted manufacturing system or a labor intensive production system. The manufacturing method will not affect the quality of the product. The estimated manufacturing costs by the two methods are:
Computer assisted Labor intensive
Direct material......................................$5.00...............................................$5.60
Direct labor(DLH denotes direct
labor hours).................................0.5DLH@$12...6.00............0.8DLH@$9......7.20
Variable overhead.........................0.5DLH@ $6...3.00..............0.8DHL@$6....4.80
Fixed overhead.....................................$2,440,000....................$1,320,000
The company's marketing research dept has recommended an introductory unit sales price of $30. Selling expenses are estimated to be $500,000 annually plus $2 for each unit sold.
1.Calculate the estimated break even point in annual unit sales of the new product if the company uses a. computer assisted manufacturing system or b. labor intensive production system.
2.Determine the annual unit sales volume at which the firm would be indifferent between the tow manufacturing methods.
Purchase this Solution
Solution Summary
Solution describes the steps to calculate break even point in the given cases. It also calculates the volume at which firm would be indifferent to both production methods.
Solution Preview
1. Calculate the estimated break even point in annual unit sales of the new product if the company uses
a. computer assisted manufacturing system or
Variable Cost per unit, V1=Direct material+ Direct labor+ Variable overhead+ variable selling expanses
=5+6+3+2=$16
Fixed Cost=F1=Fixed overheads+ annual selling ...
Education
- BEng (Hons) , Birla Institute of Technology and Science, India
- MSc (Hons) , Birla Institute of Technology and Science, India
Recent Feedback
- "Thank you"
- "Really great step by step solution"
- "I had tried another service before Brain Mass and they pale in comparison. This was perfect."
- "Thanks Again! This is totally a great service!"
- "Thank you so much for your help!"
Purchase this Solution
Free BrainMass Quizzes
Basic Social Media Concepts
The quiz will test your knowledge on basic social media concepts.
Cost Concepts: Analyzing Costs in Managerial Accounting
This quiz gives students the opportunity to assess their knowledge of cost concepts used in managerial accounting such as opportunity costs, marginal costs, relevant costs and the benefits and relationships that derive from them.
Team Development Strategies
This quiz will assess your knowledge of team-building processes, learning styles, and leadership methods. Team development is essential to creating and maintaining high performing teams.
Organizational Leadership Quiz
This quiz prepares a person to do well when it comes to studying organizational leadership in their studies.
Six Sigma for Process Improvement
A high level understanding of Six Sigma and what it is all about. This just gives you a glimpse of Six Sigma which entails more in-depth knowledge of processes and techniques.