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 Machine hours Receiving orders Packing orders Material cost per case $49 Direct labor cost per case $9 $6 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 $ 55,000 11,000 $101 $82 36,650 5,550 10,350 3,200 50 97 Direct labor benefits Machine costs Receiving department Packing department Total costs *All depreciation 27 53 $42 Variable $215,220 218,500 291,180 241,000 126,000 $585,500 $506,400 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 cases cases 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.
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 Machine hours Receiving orders Packing orders Material cost per case $49 Direct labor cost per case $9 $6 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 $ 55,000 11,000 $101 $82 36,650 5,550 10,350 3,200 50 97 Direct labor benefits Machine costs Receiving department Packing department Total costs *All depreciation 27 53 $42 Variable $215,220 218,500 291,180 241,000 126,000 $585,500 $506,400 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 cases cases 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.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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:
Violet
Expected sales (in cases)
Selling price per case
Direct labor hours
Machine hours
Receiving orders
Packing orders
Material cost per case
Direct labor cost per case
$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
Direct labor benefits
Machine costs
Receiving department
Packing department
Total costs
* All depreciation
Rose
$
55,000 11,000
$101
36,650 5,550
10,350
3,200
Break-even cases of Rose
50
-
97
$49
$82
27
Variable
$215,220
218,500* 291,180
241,000
126,000
$585,500 $506,400
53
$42
$6
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.
cases
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.
cases
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