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:

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) 57,000 11,400 Selling price per case $103 $80 Direct labor hours 32,000 6,400 Machine hours 10,600 2,550 Receiving orders 52 28 Packing orders 99 47 Material cost per case $53 $40 Direct labor cost per case $8 $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 $ $168,960 Machine costs 199,000* 291,840 Receiving department 235,000 Packing department 133,000 Total costs $567,000 $460,800 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 Break-even cases of Violet 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 Break-even cases of Violet