Variable and absorption costing and breakeven points. Shasta Hills, a winery in British Columbia, manufactures a premium white cabernet and sells primarily to distributors. Wine is sold in cases of one dozen bottles. In the year ended December 31, 2007, Shasta Hills sold 242,400 cases at an average selling price of $112.80 per case. The following additional data are for Shasta Hills for the year ended December 31, 2007 (assume constant unit costs and no price, spending, or efficiency variances):

Beginning inventory,January 1, 2 Ending inventory, December 31, Fixed manufacturing overhead Fixed operating costs Variable costs per case Direct materials Grapes Bottles, corks, and crates Direct labour Bottling Winemaking Aging On December 31, 2007, the unit costs per ca:

costing and $73.20 for absorption costing.

32,600 cases 24,800 cases

$4,504,320

$7,882,560

$19.20 per case

$12.00 per case

$7.20 per case

$16.80 per case

$2.40 per case for closing inventory are $55.20 for variable Required 1. Calculate cases of production for $hasta Hills in 2007.

2. Find the breakeven point (number of cases) in 2007:

a. under variable costing

b. under absorption costing 3. Grape prices are expected to increase 25% in 2008. Assuming all other data remain con¬

stant, what is the minimum number of cases hhasta Hills must sell in 2008 to break even?

Calculate the breakeven point:

a. under variable costing

b. under absorption costing 4. Assume the owners of hhasta Hills want to increase 2008 operating income 10% over 2007 levels. Using the same data as in requirement 3, recalculate the target quantity of cases under variable and absorption costing. Use approximation method re absorption costing.