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) 58,000 11,600 Selling price per case $102 $80 Direct labor hours 32,650 6,100 Machine hours 10,850 2,800 Receiving orders 48 28 Packing orders 96 45 Material cost per case $49 $42 Direct labor cost per case $9 $9 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 $ — $193,750 Machine costs 181,000* 232,500 Receiving department 227,500 — Packing department 111,000 — Total costs $519,500 $426,250 * 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 fill in the blank 1 Break-even cases of Violet fill in the blank 2 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 fill in the blank 3 Break-even cases of Violet fill in the blank 4

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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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)	58,000	11,600
Selling price per case	$102	$80
Direct labor hours	32,650	6,100
Machine hours	10,850	2,800
Receiving orders	48	28
Packing orders	96	45
Material cost per case	$49	$42
Direct labor cost per case	$9	$9

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	$ —	$193,750
Machine costs	181,000^*	232,500
Receiving department	227,500	—
Packing department	111,000	—
Total costs	$519,500	$426,250

^* 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	fill in the blank 1
Break-even cases of Violet	fill in the blank 2

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.