Martinez Company Essay

IntroductionMartinez Company is introducing a new fruit that may be manufactured by victimization either one of two regularitys, big(p) intensifier, or push intense manner. For the capital intensifier system, the manufacturing cost per unit atomic number 18 direct existent at $5.00, direct advertise at $6.00, variable overhead be at $3.00 and glacial manufacturing costs at $2,508,000 for the period. For the labor intense method costs per unit are direct materials at $5.50, direct labor at $8.00, variable overhead costs at $4.50 and located manufacturing costs at $1,538,000 for the period. The research department of Martinez Company recommended an introductory unit gross revenue price of $30. The selling expenses are approximately $502, 000 annually in appurtenance to $2 for each unit sold regardless of the manufacturing method apply.The act part of the research is to determine how many units the participation provide ease up to sell annually for both methods to be equal. To determine this number the company will need to calculate the indifference point. The calculation is the total fixed cost of both methods is subtracted and thendivided by the contribution gross profit per unit for each method. Indifference point = (3,010,000-2,040,000)/(14-10) = 242,500. So the company would substantiate to sell 242,500 units for both methods to be equally profitable. This is good information because ground on the manufacturing cost of each fruit method the company will have to sell a specific number of units to maximize profitability. found on this number the company will select each method in accordance with the projected number of units to be sold.Capital-Intensive Manufacturing vs. Labor-Intensive Manufacturing In the future, the Martinez Company will need to use either capital-intensive or labor intensive method for production. Capital intensive manufacturing method focuses on a high level of capital investment, while labor intensive focuses o n a high level of labor investment. Capital intensive manufacturing method is mostly utilize on a large scale production with automated processes. Labor intensive method is mostly likely used on smaller scale production with personalized products. The capital manufacturing method is also based on whether the organization is producing a standardized product or an exclusive product.The labor intensive manufacturing method should be used when a substantial amount of customer interaction is needed. Capital intensive manufacturing method basis be used when the work is too touch-and-go for employees. With labor intensive manufacturing method in that respect are lower fixed costs and higher variable costs. With the capital intensive manufacturing method there are higher fixed costs and variable costs. In this case, the capital intensive method would be the preferred choice if the sales are expected to be higher than the indifference number of $242,500.Capital intensive manufacturing me thod limits competition by serving as a parapet to entry and as a capital intensive business, the Martinez Corporation can benefit from this. Barriers to entry are obstacles that prevent new companies to function in capital-intensive industries. Capital intensive manufacturing minimizes human error resulting in a more(prenominal) effective and efficient productivity. Another great advantage with capital intensive manufacturing method is the minimal labor impact.