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1. Determine the fixed and variable portions 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 per month.

1. Determine the fixed and variable portions 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 per month.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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I just need the answers to question 1 and 2 please. Thank you!

PART A - Break-Even Analysis The management of Genuine Spice 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: Case Production Month January February March April May June 500 800 1,200 1,100 950 1,025 Instructions 1. Determine the fixed and variable portions 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 per month. Utility Total Cost $600 $660 $740 $720 $690 $705 PART B - August Budgets During July of the current year, the management of Genuine Spice Inc. asked the controller to prepare August manufacturing and income statement budgets. Demand was expected to be 1,500 cases at $100 per case for August. Inventory planning information is provided as follows: Finished Goods Inventory Estimated finished goods inventory, August 1 Cases 300 Cost $12,000 $7.000 Page
Transcribed Image Text:PART A - Break-Even Analysis The management of Genuine Spice 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: Case Production Month January February March April May June 500 800 1,200 1,100 950 1,025 Instructions 1. Determine the fixed and variable portions 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 per month. Utility Total Cost $600 $660 $740 $720 $690 $705 PART B - August Budgets During July of the current year, the management of Genuine Spice Inc. asked the controller to prepare August manufacturing and income statement budgets. Demand was expected to be 1,500 cases at $100 per case for August. Inventory planning information is provided as follows: Finished Goods Inventory Estimated finished goods inventory, August 1 Cases 300 Cost $12,000 $7.000 Page
Company Information Genuine Spice Inc. began operations on January 1 of the current year. The company produces 8-ounce bottles of hand and body lotion called Eternal Beauty. The lotion is sold wholesale in 12-bottle cases for $100 per case. There is a selling commission of $20 per case. The January direct materials, direct labor, and factory overhead costs are as follows: Direct Materials Cream Base Natural oils Bottle (8 oz.) Cost Behavior Mixing Filling Variable Variable Variable Department Cost Behavior Variable Variable Units per Case 100 ozs. 30 ozs. 12 bottles Time per Case 20 min. 5 min. 25 min. Utilities Facility Lease Equipment depreciation Supplies Cost per Unit Direct Labor $0.02 $0.30 $0.50 Factory Overhead Labor Rate per Hour $18.00 $14.40 Cost Behavior Mixed Fixed Fixed Fixed Direct Materials Cost per Case $2.00 $9.00 $6.00 $17.00 Direct Labor Cost per Case $6.00 $1.20 $7.20 Page < Total Cost $600 $14,000 $4,300 $660 $19,560
Transcribed Image Text:Company Information Genuine Spice Inc. began operations on January 1 of the current year. The company produces 8-ounce bottles of hand and body lotion called Eternal Beauty. The lotion is sold wholesale in 12-bottle cases for $100 per case. There is a selling commission of $20 per case. The January direct materials, direct labor, and factory overhead costs are as follows: Direct Materials Cream Base Natural oils Bottle (8 oz.) Cost Behavior Mixing Filling Variable Variable Variable Department Cost Behavior Variable Variable Units per Case 100 ozs. 30 ozs. 12 bottles Time per Case 20 min. 5 min. 25 min. Utilities Facility Lease Equipment depreciation Supplies Cost per Unit Direct Labor $0.02 $0.30 $0.50 Factory Overhead Labor Rate per Hour $18.00 $14.40 Cost Behavior Mixed Fixed Fixed Fixed Direct Materials Cost per Case $2.00 $9.00 $6.00 $17.00 Direct Labor Cost per Case $6.00 $1.20 $7.20 Page < Total Cost $600 $14,000 $4,300 $660 $19,560
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