ABC and CVP Analysis: Multiple Products

Good Scent, Inc., produces two colognes: Rose and Violet. Of the two, Rose is more popular. Data concerning the two products follow:

Rose Violet Expected sales (in cases) 50,000 10,000 Selling price per case $101 $82 Direct labor hours 35,950 5,550 Machine hours 9,900 3,450 Receiving orders 48 27 Packing orders 102 54 Material cost per case $53 $45 Direct labor cost per case $10 $5 The company uses a conventional costing system and assigns overhead costs to products using direct labor hours. Annual overhead costs follow. They are classified as fixed or variable with respect to direct labor hours.

Fixed

Variable Direct labor benefits $

$186,750 Machine costs 200,000^*

311,250 Receiving department 205,000

Packing department 113,000

Total costs$518,000

$498,000

2. Using an activity-based approach, compute the number of cases of each product that must be sold for the company to break even. In your computations, round all computed amounts to the nearest cent and round the number of break-even packages to the nearest whole number.