Question
Hello please solve all parts of the equation Genuine Spice Inc. began operations on January 1 of the current year. The company produces 8-ounce bottles
Hello please solve all parts of the equation
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:
DIRECT MATERIALS | ||||
Cost Behavior | Units per Case | Cost per Unit | 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 |
$17.00 |
DIRECT LABOR | ||||
Department | Cost Behavior | Time per Case | Labor Rate per Hour | Cost per Case |
Mixing | Variable | 20 min. | $18.00 | $6.00 |
Filling | Variable | 5 | 14.40 | 1.20 |
25 min. | $7.20 |
FACTORY OVERHEAD | ||
Cost Behavior | Total Cost | |
Utilities | Mixed | $600 |
Facility lease | Fixed | 14,000 |
Equipment depreciation | Fixed | 4,300 |
Supplies | Fixed | 660 |
$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-Part A: | |
1. | Determine the fixed and variable portions of the utility cost using the high-low method. Round your per unit cost to two decimal places. |
2. | Determine the contribution margin per case. Round your answer to two decimal places. |
3. | Determine the fixed costs per month, including the utility fixed cost from part (1). Refer to the lists of Amount Descriptions for the exact wording of the answer choices for text entries. |
4. | Determine the break-even number of cases per month. |
1. Determine the fixed and variable portions of the utility cost using the high-low method. Round your per unit cost to two decimal places.
At the High Point | At the Low Point | |
Variable cost per unit | ||
Total fixed cost | ||
Total cost |
2. Determine the contribution margin per case. Round your answer to two decimal places.
3. Determine the fixed costs per month, including the utility fixed cost from part (1). Refer to the lists of Amount Descriptions for the exact wording of the answer choices for text entries.
1 | Total fixed costs: |
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4. Determine the break-even number of cases per month. cases
6. Prepare the August direct materials purchases budget. Enter all amounts as positive numbers.
Genuine Spice Inc. | ||||
Direct Materials Purchases Budget | ||||
For the Month Ended August 31 | ||||
Cream Base (ozs.) | Natural Oils (ozs.) | Bottles (bottles) | Total | |
Direct materials to be purchased | ||||
7. Prepare the August direct labor cost budget. Round the hours required for production to the nearest hour. Enter all amounts as positive numbers.
Genuine Spice Inc. | |||
Direct Labor Cost Budget | |||
For the Month Ended August 31 | |||
Hours required for production of: | Mixing | Filling | Total |
8. Prepare the August factory overhead cost budget. Enter all amounts as positive numbers. If an amount box does not require an entry, leave it blank. (Entries of zero (0) will be cleared automatically by CNOW.)
Genuine Spice Inc. | |||
Factory Overhead Cost Budget | |||
For the Month Ended August 31 | |||
Fixed | Variable | Total | |
Factory overhead: | |||
Utilities | |||
Facility lease | |||
Equipment depreciation | |||
Supplies | |||
Total |
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