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
Cost Behavior Units per Case Cost per Unit 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
$17.00
DIRECT LABOR
Department Cost Behavior Time per Case Labor Rate per Hour Cost per Case
Mixing Variable 20 min $18.00 $6.00
Filling Variable 5 14.40 1.20
25 min. $7.20
FACTORY OVERHEAD
Cost Behavior Total Cost
Utilities Mixed $600
Facility lease Fixed 14,000
Equipment depreciation Fixed 4,300
Supplies Fixed 660
$19,560
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:
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 your per unit cost to two decimal places.
2. Determine the contribution margin per case. Round your answer to two decimal places.
3. Determine the fixed costs per month, including the utility fixed cost from part (1). Refer to the lists of Amount Descriptions for the exact wording of the answer choices for text entries.
4. Determine the break-even number of cases per month.