Good Scent, Inc., produces two colognes: Rose and Violet. Of the two, Rose is more popular. Data
Question:
Good Scent, Inc., produces two colognes: Rose and Violet. Of the two, Rose is more popular. Data concerning the two products follow:
Rose
Violet
Expected sales (in cases)
50,000
10,000
Selling price per case
$101
$82
Direct labor hours
35,950
5,550
Machine hours
9,900
3,450
Receiving orders
48
27
Packing orders
102
54
Material cost per case
$53
$45
Direct labor cost per case
$10
$5
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
Direct labor benefits
$
$186,750
Machine costs
200,000*
311,250
Receiving department
205,000
Packing department
113,000
Total costs
$518,000
$498,000
* All depreciation
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
Cornerstones of Cost Management
ISBN: 978-1285751788
3rd edition
Authors: Don R. Hansen, Maryanne M. Mowen