Question

Answer problem in full.

Answer 1

Genuine Spice Inc.
	High Low Method=change in cost/Change In Production
	High Low Method=	($740-$600)/(1200-500)
	Variable cost per unit=	$140/700=	$             0.20
1)	At Higher level variable cost=(1200*.20)	$                                  240.00
	Fixed cost=($740-$240)	$                                  500.00
	Total cost	$                                  740.00
	At Lower level Variable cost=(500*.20)	$                                  100.00
	Fixed Cost	$                                  500.00
	Total cost	$                                  600.00
	Variable cost per unit will be remain the same at all levels of activity, but fixed cost in total will remain the same.
2)	Calculation of contribution Margin per case
	Selling Price=(A)		$        100.00
	Variable cost:
	Direct Material($2+$9+$6)	$                                    17.00
	Direct Labor($6+$1.20)	$                                      7.20
	Utilities	$                                      0.20
	Selling Expense-Selling commission	$                                    20.00
	Total variable cost per case=(B)		$          44.40
	Contribution Margin per case=(A)-(B)		$          55.60
3)	Calculation of Fixed cost:
	Utilities Expense	$                                  500.00
	Facility Lease	$                            14,000.00
	Equipment Depreciation	$                              4,300.00
	Supplies	$                                  660.00
	Total	$                            19,460.00
4)	Break even Sales in Units=(Fixed cost/Contribution Margin per unit)
	Fixed Cost=(A)	$                            19,460.00
	Contribution Margin per unit=(B)	$                                    55.60
	Break even Sales in Units=(A)/(B)	350	Cases
Part B 5)
	Genuine Spice Inc.
	Production Budget
	For the month ended August 31st,
	Expected cases to be sold	1500
	Plus: desired ending inventory	175
	Cases required	1675
	Less: beginning Inventory	-300
	Cases produced	1375
6)	Genuine Spice Inc.
	Purchase Budget
	For the month ended August 31st,
		Cream base	Natural Oils	Bottles	Total
	Units required for production(1375*100 ozs),(1375*30 ozs),(1375*12 bottles)=(A)	137500	41250	16500
	Add: Ending Inventory=(B)	1000	360	240
	Total needs=(C )=(A)+(B)	138500	41610	16740
	Less: Beginning Inventory=(D)	250	290	600
	Direct Material to be purchases=(E )=(C )-(D)	138250	41320	16140
	Unit purchase price=(F)	$                                      0.02	$             0.30	$         0.50
	Total Direct Material purchased=(E )*(F)	$                              2,765.00	$ 12,396.00	$ 8,070.00	$ 23,231.00