Part A-Break-Even Analysis he 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 athered from the first six months of operation regarding this cost: Honth Case Production Utility Total Cost Tanuary 500 $600 February 800 660 March 1,200 740 April 1,100 720 May 950 690 June 1,025 705 Eequired: - Determine the fixed and variable portions of the utility cost using the high-low method. Round the per unit cost to the nearest cent. At the High Point At the Low Point Jariable cost per unit Total fixed cost Total cost . Determine the contribution margin per case. Round your answer to the nearest cent. Contribution margin per case $ . Determine the fixed costs per month, including the utility fixed cost from part (1). Utilities cost (from part 1) Facility lease Equipment depreciation Supplies Total fixed costs Determine the break-even number of cases per month. cases
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
Part A:
Note: You must complete part A before completing parts B and C.
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
|
| DIRECT LABOR | |||||
| Department | Cost Behavior |
Time per Case |
Labor Rate per Hour |
Direct Labor Cost per Case |
|
| Mixing | Variable | 20 min | $18.00 | $6.00 | |
| Filling | Variable | 5 | 14.40 | 1.20 | |
| 25min | $7.20 |
| FACTORY OVERHEAD | ||
| Cost Behavior | Total Cost | |
| Utilities | Mixed | $600 |
| Facility lease | Fixed | 14,000 |
| Equipment depreciation | Fixed | 4,300 |
| Supplies | Fixed | 660 |
| $19,560 |
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