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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

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 $100 $80
Direct labor hours 36,000 6,000
Machine hours 10,000 3,000
Receiving orders 50 25
Packing orders 100 50
Material cost per case $50 $43
Direct labor cost per case $10 $7

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 $ $200,000
Machine costs 200,000* 262,000
Receiving department 225,000
Packing department 125,000
Total costs $550,000 $462,000

* 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 _cases
Break-even cases of Violet _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 _cases
Break-even cases of Violet _ cases

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