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)	46,500	9,300
Selling price per case	$99	$79
Direct labor hours	35,100	5,750
Machine hours	9,450	2,750
Receiving orders	50	27
Packing orders	104	53
Material cost per case	$51	$43
Direct labor cost per case	$12	$9

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	$		$183,825
Machine costs	192,000*		306,375
Receiving department	218,500
Packing department	145,000
Total costs	$555,500		$490,200

^* All depreciation

Required:

1. Using the conventional approach, compute the number of cases of Rose and the number of cases of Violet that must be sold for the company to break even. In your computations, round variable unit cost to the nearest cent and round the number of break-even packages to the nearest whole number.

Break-even cases of Rose	fill in the blank 1 cases
Break-even cases of Violet	fill in the blank 2 cases

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.

Break-even cases of Rose	fill in the blank 3 cases
Break-even cases of Violet	fill in the blank 4 cases

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1. Remember to calculate package contribution margin per unit.

2. Benefits and Machine costs are unit based variable costs. The CVP formula will utilize three costs that utilize X1 (number of packages), X2 (receiving orders), and X3 (packing orders).