Decision making across the organization

Topics: Marketing, Need, Decision making Pages: 4 (760 words) Published: April 26, 2015


Decision making across the organization
Valeri R. Smith
ACC 561
April 6, 2015
Michael Martin
Decision making across the organization

The Martinez Company is producing a new product, and in order to correctly figure out or estimate the break-even point, I will use the capital-intensive manufacturing method. The first thing needing to be done is to figure out the manufacturing cost of making the new product. The cost of the new product per unit consists of the following costs: $5 + $6 + $3 for a total of $14 per unit. Thus, for every unit that the Martinez Company sells they will make a profit of $16 seeing as the selling price is listed as $30.00 per unit. The $30, selling price consists of the $14, for manufacturing and $16 profit. The Martinez Company has a fixed manufacturing cost totaling $2,508,000 because of the chosen methodology. The company must also cover for the annual incremental selling expense of $502,000 as well as an additional $2 for each unit sold. Without factoring the incremental selling expenses, it can be deduced that if you divide the fixed manufacturing cost of the $2,508,000 by the profit received from each unit, or $16, the Martinez Company needs to sell at least 156,750 units yearly. You also have to add in the cost of $2 in addition to a stated annual cost of $502,000. Therefore, in order to sell 156,700 units the company will incur an additional cost of $2, and $2 times the 156,750 units is going to total $313,500. This number must be added to the $502,000 that was already stated. When these numbers are added together the total is now $815,550. You then need to divide these costs by the $16 profit which means that the company needs to manufacture 50,969 units. These additional units plus the initially calculated 156,750 units brings the total number of units needed to have the company break even using the capital-intensive method is 207,718 units. The profit if calculated using the labor intensive method is only $12...
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