9. CP5Part.A Comprehensive Problem S Note: You must complete part A before compl

Question

9. CP5Part.A Comprehensive Problem S Note: You must complete part A before completing parts B and C. lled Eternal Beauty. The lotion is sold Genuine Spice Inc. began operations on January 1, 2016. The company produces a hand and body lotion in an eight-ounce bottle ca 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 DIRECT MATERIALS Cost Units Cost Direct Materials Behavior per Case per Unit Cost per Case $2.00 9.00 6.00 $17.00 Cream base Variable 100 ozs. $0,02 Natural oils Variable 30 ozs. 0.30 Bottle (8-oz.) Variable 12 bottles 0.50

Explanation / Answer

As per policy, only one question and its four parts are allowed to answer, so answering 9 CPS Part A :

9 CPS Part A :

1)

Variable utility cost = 140/700 = 0..20 per unit

Fixed cost = 600 - (500 * 0.20) = $500

2) Contribution margin :

3) Fixed cost per month :

4) Break even (cases) per month = Fixed cost / contribution per case = $19460 / $55.60 = 350 cases

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production utility cost $ High level 1200 740 Low level 500 600 Difference 700 140

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