Question

Instructions Amount Descriptions Questions (Part A) Production Budget Budgeted Income Statement Variance Analysis (Part C) Direct Materials Purchases Budget Direct Labor Cost Budget Factory Overhead Cost Budget Instructions une spice Inc began operations on January 1 of the current year. The company produces aight pun January direct materials, direct labor, and factory overhead costs are as follows: bois ot hart and bestu la calor Eternal Beauty The lotion is sold wholesale in 12 bottle cases for $100 per case. There is a selling commission Stor sanner case There is a selling commission of $20 per case. The DIRECT MATERIALS Cost Behavior Units per Case Cost per Unit Cost per Case Cream base Variable 100 oz $0.02 $ 200 Natural oils Variable 30 oz. 0130 9.00 Bottle (8-02.) Variable 12 bottles 0.50 6.00 $17.00 DIRECT LABOR Department Cost Behavior Time per Case Labor Rate per Hour Cost per Case Mixing Variable 20 min Filling Variable 25 min FACTORY OVERHEAD Cost Behavior Total Cost Utilities Mixed $500 Facility lease Fixed 14,000 Equipment depreciation Fixed 4,300 Fbed 660 Supplies $19,560 Activate Windows

Answer 1

Part A

1.

	Case Production	Utility Cost
At the High Point	1200	$                       740
At the Low Point	500	$                       600
Change	700	$                       140

Variable utility cost = $140/700 = $0.20 per case

Fixed utility cost (at the high point) = $740 - ($0.20 x 1200) = $740 - $240 = $500

Fixed utility cost (at the low point) = $600 - ($0.20 x 500) = $600 - $100 = $500

2. Contribution margin per case: $55.60

Sales price per case $		100.00
Less: Variable costs
Direct materials	17.00
Direct labor	7.20
Factory overhead (Utilities)	0.20
Selling commission	20.00
Total variable costs per case $		44.40
Contribution margin per case $		55.60

3. Fixed costs per month: $19460

Utilities	500
Factory lease	14000
Equipment depreciation	4300
Supplies	660
Total fixed costs $	19460

4. Break-even number of cases per month: 350

Break-even (units) = Total fixed costs/Contribution margin per unit = $19460/$55.60 = 350 cases

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