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) Selling price per case Direct labor hours 50,000 $100 10,000 80 36,000 10,000 6,000 3,000 Machine hours Receiving orders Packing orders Material cost per case Direct labor cost per case 50 25 100 50 S50 S43 s10 $7 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 $200,000 262,000 Machine costs 200,000* Receiving department Packing department 225,000 125,000 S550,000 Total costs $462,000 *All depreciation.
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) Selling price per case Direct labor hours 50,000 $100 10,000 80 36,000 10,000 6,000 3,000 Machine hours Receiving orders Packing orders Material cost per case Direct labor cost per case 50 25 100 50 S50 S43 s10 $7 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 $200,000 262,000 Machine costs 200,000* Receiving department Packing department 225,000 125,000 S550,000 Total costs $462,000 *All depreciation.
Chapter18: The Management Of Accounts Receivable And Inventories
Section: Chapter Questions
Problem 16P
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Question
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.
2. Using an activity-based approach, compute the number of cases of each product that must
be sold for the company to break even.
Transcribed Image Text: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)
Selling price per case
Direct labor hours
50,000
$100
10,000
80
36,000
10,000
6,000
3,000
Machine hours
Receiving orders
Packing orders
Material cost per case
Direct labor cost per case
50
25
100
50
S50
S43
s10
$7
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
$200,000
262,000
Machine costs
200,000*
Receiving department
Packing department
225,000
125,000
S550,000
Total costs
$462,000
*All depreciation.
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