Accounting Martinez Corporation Essay

Martinez companionship has decided to award a sensitive product. The new product hatful be fabricate by either a capital- intense manner or a labor-intensive system. The manufacturing method acting will not affect the timbre of the product. The estimated manufacturing tolls by the 2 methods ar as follows Capital prod Intensive Intensive station materials $5 per building block $5.50 per social social unit chair labor $6 per unit $8.00 per unit Variable overhead $ 3 per unit $ 4.50 per unit Fixed manufacturing woo $ 2,508,000 $ 1,538,000 Martinezs market explore department has recommended an introductory unit gross sales price of $ 30. The incremental change expenses are estimated to be $502,000 annually plus $2 for each unit sold regardless of manufacturing method.a. Calculate the estimated break-even point in annual unit sales of the new product if Martinez confederation accustoms the1. Capital intensive manufacturing method2. Labor intensive manufacturing methodb. Determine the annual unit sales volume at which Martinez Company would be indifferent between the two manufacturing methods. c. Explain the circumstance under which Martinez should employ each of the two manufacturing methods. conclusiveness Making Across the OrganizationManagers that work for a company that sells goods and serve to customers must have a good understanding of budgets planning to story for both fixed cost and variable costs. Making a termination within leadership of a company requires the management to know cost effectiveness, what price to sell the items, and the actual cost effectiveness of their product or service to ensure they are competitive within the market. There are many different closes that are made within a company and there are many different viewpoints from managers to make these decisions in crop to be successful. The cost behavior analysis is the study of how specific costs of an item that is used within a company changes the aims of bu siness activity. An manikin we chamberpot use is the American automotive maker General Motors. feeling at todays vehicles and the items such as Bluetooth functions, DVD players, send radio and other amenities, prices have increased. About 6-7 years ago you could get the same vehicle you are purchasing to day for about 10-20% less. repayable to inflation, desire interest loans decreases and the amount of new technology that is added to a new vehicle prices have gone significantly higher. This could in any case be callable to a rising economy and rising job market and bank loans cosmos allowed to go from 60 months previously all the way to 82 months. In todays market because of interest rates being lower customers are able to buy more expensive cars that are in their monthly price range of a loan versus the name of the full price of the vehicle. In our exercise the Martinez Company had decided to introduce a new product. However, the new product can be manufactured by of tw o methods either capital intensive method or the labor intensive method. Below are the solutions for the problems that were issuedA-1 Capital intensive manufacturing method selling price per unit = $30 heart and soul variable cost per unit = $5 + $6 + $3 + $2 = $16Total fixed cost = $2,508,000 + $502,000 = $3,010,000 constituent margin per unit = $30 $16 = $14Break-even point (units) = $3,010,000 $14= 215,000 units per year.A-2 Labor intensive manufacturing methodSelling price per unit = $30Total variable cost per unit = $5.50 + $8 + $4.5 + $2 = $20Total fixed cost = $1,538,000 + $502,000 = $2,040,000 component margin per unit = $30 $20 = $10Break-even point (units) = $2,040,000 $10= 204,000 units per year.B= ($3,010,000 $2,040,000) / ($14 $10)= 242,500 units per year.Capital Intensive methodLabor Intensive methodRevenues$7,275,000$7,275,000Direct materials 1,212,500 1,333,750Direct labor 1,455,000 1,940,000Variable overhead 727,500 1,091,250Variable selling expenses 485,000 485,000Contribution Margin$3,395,000$2,425,000Fixed manufacturing costs 2,508,000 1,538,000Fixed selling expenses 502,000 502,000Net Income$385,000$385,000The plunder income under both the manufacturing method is $385,000 when 242,500 units were sold that year. Therefore the Martinez Company would be indifferent or neutral between the two manufacturing methods at this level of annual sales. C.The Martinez Company should be employ the capital intensive manufacturing method if the units produced are identical in nature capital. They can also use the capital intensive manufacturing method if they want to be more absolute of production and a reduction in errors. This method can also reduce the average cost per unit by increasing the level of output or products sold. If the Marinez Company wanted to employ the labor intensive manufacturing method it should be employed when flexibility is key. If the products are meeting a different level of customer or consumer demands this would be t he best method to use. This is also used when actual labors are involved with the production ilk a service versus a product and the employee can physically encumbrance the demand of the consumer and change the level of need as necessary. For products versus services the products can be customized from what a customer prefers or demands as well as feedback on production can occur.ReferenceKimmel, P.D. Weydandt, J.J., and Kieso, D.E. (2011) accounting Toolsfor business decision making (4th ed.). Hoboken NJ John Wiley and Sons.