kathidavis41 Posts: 1, Reputation: 1 New Member #1 May 2, 2015, 09:45 PM
Annual Unit Sales Volume??
I am to determine the annual unit sales volume at which Martinez Company would be indifferent between either the Capital-Intensive or Labor-Intensive method.

I have calculated the break even point as being 156,750 units if they chose the capital and 113,926 for the labor. I then found the contribution ratio and divided it into the fixed costs to get \$4,702,500.03 and \$3,417,777.78 respectfully. Is this the annual unit sales volume? If not how do I find it? The question never tells me how many items were sold. I only know the variable costs and the fixed manufacturing costs. The unit sale price is \$30 regardless of which method is chosen and the selling expense is \$502,000 plus \$2 per unit sold.

 paraclete Posts: 2,706, Reputation: 173 Ultra Member #2 May 3, 2015, 02:37 AM
the methodology will give you breakeven(Required volume) for each scenario so at a constant selling price you should be able to determine the point of indifference which is where profit is equal. Calculate the contribution margin which is selling price less variable expenses and you should be able to find the answer

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