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) 53,000 10,600 Selling price per case $102 $82 Direct labor hours 36,200 6,100 Machine hours 10,050 2,650 Receiving orders 48 24 Packing orders 95 55 Material cost per case $48 $41 Direct labor cost per case $11 $8 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 $ $198,810 Machine costs 218,000* 266,490 Receiving department 243,500 Packing department 137,500 Total costs $599,000 $465,300 * 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 14,445 X cases Break-even cases of Violet 3,812 X 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- Material cost per case $48 $41 Direct labor cost per case $11 $8 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 $ $198,810 Machine costs 218,000* 266,490 Receiving department 243,500 Packing department 137,500 Total costs $599,000 $465,300 * 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 14,445 X cases Break-even cases of Violet 3,812 X 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 Feedback Check My Work 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)
