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 overhead costs are as follows:
|
DIRECT MATERIALS | Products | Cost Behavior | Units per Case | Cost per Unit | Direct Materials Cost per Case |
| Cream base | Variable | 100 ozs. | $0.02 | $2.00 |
| Natural oils | Variable | 30 ozs. | 0.30 | 9.00 |
| Bottle (8-oz.) | Variable | 12 bottles | 0.50 | 6.00 |
| Total direct materials cost per case | | | | $17.00 |
|
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 min. | 14.40 | 1.20 |
| Total direct labor cost per case | | 25 min. | | $7.20 |
|
FACTORY OVERHEAD | Line Item Description | Cost Behavior | Total Cost |
| Utilities | Mixed | $600 |
| Facility lease | Fixed | 14,000 |
| Equipment depreciation | Fixed | 4,300 |
| Supplies | Fixed | 660 |
| Total cost | | $19,560 |
Part ABreak-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:
| Month | Case Production | Utility Total Cost |
| January | 500 | $600 |
| February | 800 | 660 |
| March | 1,200 | 740 |
| April | 1,100 | 720 |
| May | 950 | 690 |
| June | 1,025 | 705 |
Required:
1. Determine the fixed and variable portions of the utility cost using the high-low method. Round the per unit cost to the nearest cent.
| Line Item Description | At the High Point | At the Low Point |
| Variable cost per unit | $fill in the blank 1 | $fill in the blank 2 |
| Total fixed cost | fill in the blank 3 | fill in the blank 4 |
| Total cost | fill in the blank 5 | fill in the blank 6 |
2. Determine the contribution margin per case. Round your answer to the nearest cent. Contribution margin per case fill in the blank 1 of 1$
3. Determine the fixed costs per month, including the utility fixed cost from part (1).
| Line Item Description | Fixed Costs per Month |
| Utilities cost (from part 1) | $fill in the blank 8 |
| Facility lease | fill in the blank 9 |
| Equipment depreciation | fill in the blank 10 |
| Supplies | fill in the blank 11 |
| Total fixed costs | $fill in the blank 12 |
4. Determine the break-even number of cases per month. fill in the blank 1 of 1$ cases
