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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 58,500 11,700 $102 $78 32,400 6,450 Expected sales (in cases) Selling price per case Direct labor hours Machine hours Receiving orders Packing orders 10,250 3,000 52 25 98 55 Material cost per case $51 $41 Direct labor cost per case $12 $9 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 $190,365 Direct labor benefits Machine costs Receiving department 212,000* 275,835 200,000 Packing department 144,000 Total costs $556,000 $466,200 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 X 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 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). 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 58,500 11,700 $102 $78 32,400 6,450 Expected sales (in cases) Selling price per case Direct labor hours Machine hours Receiving orders Packing orders 10,250 3,000 52 25 98 55 Material cost per case $51 $41 Direct labor cost per case $12 $9 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 $190,365 Direct labor benefits Machine costs Receiving department 212,000* 275,835 200,000 Packing department 144,000 Total costs $556,000 $466,200 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 X 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 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)
