Comprehensive Problem 5 Part A: Note: You must complete part A before completing

Question

Comprehensive Problem 5
Part A:

Note:  You must complete part A before completing parts B and C.

Part A - Break-Even Analysis

Instructions:

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.

2.  Determine the contribution margin per case. Enter your answer to the nearest cent. For example, 89.458 would be entered as 89.46

Contribution margin per case: $                   _________________             

3.  Determine the fixed costs per month, including the utility fixed cost from part (1). Enter your answers to the nearest whole number. For example, 89.45 would be entered as 89 and 89.56 would be entered as 90.

4.  Determine the break-even number of cases per month. Round your answer to the nearest whole number.
                  _________________              cases

At High Point At Low Point Variable Cost per Unit $                   _________________              $                   _________________              Total Fixed Cost $                   _________________              $                   _________________              Total Cost $                   _________________              $                   _________________              Natural Fragrance, Inc., began operations on January 1, 2012. 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 $80 per case. There is a selling commission of $16 per case. The January direct materials, direct labor, and factory overhead costs are as follows: The management of Natural Fragrance, 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: Determine the fixed and variable portion of the utility cost using the high-low method. Round the per unit cost to the nearest cent. Determine the contribution margin per case. Enter your answer to the nearest cent. For example, 89.458 would be entered as 89.46 Determine the fixed costs per month, including the utility fixed cost from part (1). Enter your answers to the nearest whole number. For example, 89.45 would be entered as 89 and 89.56 would be entered as 90. Determine the break-even number of cases per month. Round your answer to the nearest whole number.

Explanation / Answer

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.

2. Determine the contribution margin per case. Enter your answer to the nearest cent. For example, 89.458 would be entered as 89.46

Contribution margin per case: $ ____46.98______

3. Determine the fixed costs per month, including the utility fixed cost from part (1). Enter your answers to the nearest whole number. For example, 89.45 would be entered as 89 and 89.56 would be entered as 90.

4. Determine the break-even number of cases per month. Round your answer to the nearest whole number.

____350______ cases

At High Point At Low Point Variable Cost per Unit $ ___0.10______ $ ______0.10_______ Total Fixed Cost $ _____200________ $ _____200______ Total Cost $ _____300______ $ _______230_______

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