Comprehensive Problem 5 Part A:

Note: You must complete part A before completing parts B and C.

Genuine Spice Inc. began operations on January 1 of the current year. The company produces 8-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:

Products	Cost Behavior	Units per Case	Cost per Unit	Direct Materials Cost per Case
Cream base	Variable	100 ozs.	$0.02	$2.00
Natural oils	Variable	30 ozs.	0.30	9.00
Bottle (8-oz.)	Variable	12 bottles	0.50	6.00
Total direct materials cost per case				$17.00

Department	Cost Behavior	Time per Case	Labor Rate per Hour	Direct Labor Cost per Case
Mixing	Variable	20 min.	$18.00	$6.00
Filling	Variable	5 min.	14.40	1.20
Total direct labor cost per case		25 min.		$7.20

Line Item Description	Cost Behavior	Total Cost
Utilities	Mixed	$600
Facility lease	Fixed	14,000
Equipment depreciation	Fixed	4,300
Supplies	Fixed	660
Total cost		$19,560

Part ABreak-Even Analysis

The management of Genuine Spice Inc. wishes 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:

Month	Case Production	Utility Total Cost
January	500	$600
February	800	660
March	1,200	740
April	1,100	720
May	950	690
June	1,025	705

Required:

1. Determine the fixed and variable portions of the utility cost using the high-low method. Round the per unit cost to the nearest cent.

Line Item Description	At the High Point	At the Low Point
Variable cost per unit	$fill in the blank 1	$fill in the blank 2
Total fixed cost	fill in the blank 3	fill in the blank 4
Total cost	fill in the blank 5	fill in the blank 6

2. Determine the contribution margin per case. Round your answer to the nearest cent. Contribution margin per case fill in the blank 1 of 1$

3. Determine the fixed costs per month, including the utility fixed cost from part (1).

Line Item Description	Fixed Costs per Month
Utilities cost (from part 1)	$fill in the blank 8
Facility lease	fill in the blank 9
Equipment depreciation	fill in the blank 10
Supplies	fill in the blank 11
Total fixed costs	$fill in the blank 12

4. Determine the break-even number of cases per month. fill in the blank 1 of 1$ cases