Break Even Analysis

Instructions Genuine Spice Inc. began operations on January 1 of the current year. The company produces eight-ounce bottles of hand and body lotion called Eternal Beauty. The lotion is sold wholesale in 12-bottle cases for $100 per case. There is a selling commission of $20 per case. The January direct materials, direct labor, and factory overhead costs are as follows DIRECT MATERIALS Units per Case 100 oz. 30 oz 12 bottles Cost per Unit S0.02 0.30 0.50 Cost per Case 2.00 9.00 6.00 $17.00 Cost Behavior Cream base Variable Natural oils Variable Bottle (8-oz.) Variable DIRECT LABOR Department Cost Behavior Time per Case Labor Rate per Hour Cost per Case Mixing Variable FillingVariable $6.00 1.20 $7.20 $18.00 20 min 5 25 min 1 14.40 FACTORY OVERHEAD Utilities Facility lease Equipment depreciation Supplies Cost Behavior Mixed Fixed Fixed Fixed Total Cost $600 14,000 4,300 660 Instructions Part A-Break-Even Analysis The management of Genuine Spice Inc. wants to determine the number of cases required to break even per month. The utilities cost, which is part of factory overhead, is a mixed cost. The following information was gathered from the first six months of operation regarding this cost Case Production Utility Total Cost January February March April May June 500 800 1,200 1,100 950 1,025 $600 660 740 720 690 705 Required-Part A: 1. Determine the fixed and variable portion of the utlity cost using the high-low method 2. Determine the contribution margin per case 3. Determine the fired costs per month, including the utility fired cost from part (t) 4. Determine the break-even number of cases per month