Good Scent, Inc., produces two colognes: Rose and Violet. Of the two, Rose is more popular. Data concerning the two products follow: Expected sales (in cases) 51,000 10,200 Selling price per case. $100 $83 Direct labor hours. 36,750 6,400 Machine hours 9,250 2,700 Receiving orders 52 24 Packing orders 98 51 Material cost per case $49 $44 Direct labor cost per case $12 $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. Direct labor benefits Machine costs Receiving department Packing department Total costs Fixed Rose Violet $ Variable $215,750 215,750 211,000 212,500 149,000 $572/500 $431,500

Good Scent, Inc., produces two colognes: Rose and Violet. Of the two, Rose is more popular. Data concerning the two products follow: Expected sales (in cases) 51,000 10,200 Selling price per case. $100 $83 Direct labor hours. 36,750 6,400 Machine hours 9,250 2,700 Receiving orders 52 24 Packing orders 98 51 Material cost per case $49 $44 Direct labor cost per case $12 $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. Direct labor benefits Machine costs Receiving department Packing department Total costs Fixed Rose Violet $ Variable $215,750 215,750 211,000 212,500 149,000 $572/500 $431,500

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

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
11 X

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:
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
$12
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
Rose Violet
51,000 10,200
$100
36,750
9,250
52
98
All depreciation
211,000
212,500
149,000
$572 500
$83
6,400
2,700
24
51
$44
$8
Variable.
$215,750
215,750
$431,500

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