Answer:
For Capital Incentive manufacturing method = 26,623 Units
For Labor Incentive manufacturing method = 10,714 Units
Explanation:
We are asked to find out the annual break - even point in units if Sharpie uses the Capital Intensive Method and Labour intensive Method.
Solution:
1. For Capital Intensive Method:
Direct Materials = 10
Direct Labor = 4
Variable MOH = 5
Variable Selling = 4
Total Variable Cost = T = 23
Selling Price = P = 100
Contribution Margin = M = P-T = 77
Fixed Overhead:
Fixed MOH = 1800000
Fixed Selling costs = 250000
Total Fixed Costs = 2050000
Break Even Point in Units = Total Fixed Cost / M = 26623
2. For Labor Intensive Method:
Direct Materials = 12
Direct Labor = 12
Variable MOH = 2
Variable Selling = 4
Total Variable Cost = T = 30
Selling Price = P = 100
Contribution Margin = M = P-T = 70
Fixed Overhead:
Fixed MOH = 500000
Fixed Selling costs = 250000
Total Fixed Costs = 750000
Break Even Point in Units = Total Fixed Cost / M = 10714
