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:
Rose
Violet
Expected sales (in cases)
47,000
9,400
Selling price per case
$99
$83
Direct labor hours
35,200
6,450
Machine hours
10,950
3,000
Receiving orders
48
23
Packing orders
98
51
Material cost per case
$51
$43
Direct labor cost per case
$11
$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
Variable
Direct labor benefits
$ —
$179,095
Machine costs
185,000*
279,055
Receiving department
239,000
—
Packing department
135,000
—
Total costs
$559,000
$458,150
* 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
?
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
?
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