Royal Essentials, Inc. began operations on January 1, 2008. The company produces a hand and body lotion in an eight-ounce bottle called Eternal Beauty. The lotion is sold wholesale in 12-bottle cases for $80 per case. There is a selling commission of $16 per case. The January direct materials, direct labor, and factory overhead costs are as follows:

The management of Royal Essentials, 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:

Instructions
1. Determine the fixed and variable portion of the utility cost using the high-low method.
2. Determine the contribution margin per case.
3. Determine the fixed costs per month, including the utility fixed cost from part (1).
4. Determine the break-even number of cases permonth.

DIRECT MATERIALS Direct Materials Cost per Case S1.08 6.00 4.80 $11.88 Cost Behavion Units per Case 72 ozS. 24 ozs 12 bottles Cost per Unit Cream base Natural oils Bottle (8-oz.) Variable Variable Variable S0.015 0.250 0.400 DIRECT LABOR Labor Rate per Hour 15.00 Direct Labor Cost Cost Behavior Time Department Mixing Filling per Case $4.20 0.84 5.04 per Case Variable Variable 16.80 min. 4.20 min. 21.00 min 12.00 FACTORY OVERHEAD Cost Behavior Total Cost Utilities Facility lease Equipment depreciation Supplies Mixed Fixed Fixed Fixed S 230 9,694 3,600 600 14,124 2008 Case Production Utility Total Cost January February March April May June 300 600 1,000 900 750 825 $230 265 300 292 275 280