Comprehensive Problem 5 Part A: Note: You must comple
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Comprehensive Problem 5
Part A:
Note: You must complete part A before completing parts B and C.
Genuine Spice Inc. began operations on January 1, 2014. The
company produces a hand and body lotion in an eight-ounce bottle
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 overhead costs are as follows:
Part A—Break-Even Analysis
The 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 gathered from the first six months of
operation regarding this cost:
Required:
1. Determine the fixed and variable portion of the utility cost, using the high-low method. Round the per unit cost to the nearest cent.
| At High Point | At Low Point | |
| Variable cost per unit | $ | $ |
| Total fixed cost | $ | $ |
| Total cost | $ | $ |
2. Determine the contribution margin per case. Enter your answer to the nearest cent.
Contribution margin per case $
3. 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 | $ |
4. Determine the break-even number of cases per
month.
cases
