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 Expected sales (in cases) 48,500 9,700 Selling price per case $98 $83 Direct labor hours 32,000 6,000 Machine hours 10,700 3,000 Receiving orders 50 24 Packing orders 96 50 Material cost per case $51 $45 Direct labor cost per case $11 $8 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 $ — $163,400 Machine costs 211,000* 216,600 Receiving department 233,500 — Packing department 112,500 — Total costs $557,000 $380,000 * 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 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

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter11: Differential Analysis And Product Pricing

Section: Chapter Questions

Problem 22E: Total cost method of product pricing Based on the data presented in Exercise 17, assume that Smart...

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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
Expected sales (in cases)	48,500	9,700
Selling price per case	$98	$83
Direct labor hours	32,000	6,000
Machine hours	10,700	3,000
Receiving orders	50	24
Packing orders	96	50
Material cost per case	$51	$45
Direct labor cost per case	$11	$8

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	$ —	$163,400
Machine costs	211,000^*	216,600
Receiving department	233,500	—
Packing department	112,500	—
Total costs	$557,000	$380,000

^* 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
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

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