
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Transcribed Image Text:ABC and CVP Analysis: Multiple Products
Good Scent, Inc., produces two colognes: Rose and Violet. Of the two, Rose is more popular. Data concerning the two products follow:
Expected sales (in cases)
Selling price per case
Direct labor hours
Machine hours
Receiving orders
Packing orders
Material cost per case
$49
Direct labor cost per case
$8
The company uses a conventional costing system and assigns overhead costs to products using direct labor hours. Annual overhead costs follow. They are classified as fixed or variable with respect to direct labor hours.
Direct labor benefits
Machine costs
Receiving department
Packing department
*
Total costs
All depreciation
Fixed
$
Rose Violet
190,000*
222,500
116,000
$528,500
Break-even cases of Rose
49,500 9,900
$101
$80
34,850 5,700
9,750 2,500
Break-even cases of Violet
52
95
28
46
$43
$6
Variable
$170,310
316,290
Required:
1. Using the conventional approach, compute the number of cases of Rose and the number of cases of Violet that must be sold for the company to break even. In your computations, round variable unit cost to the nearest cent and round the number of
break-even packages to the nearest whole number.
G F
$486,600
cases
cases

Transcribed Image Text:2. Using an activity-based approach, compute the number of cases of each product that must be sold for the company to break even. In your computations, round all computed amounts to the nearest cent and round the number of break-even packages
to the nearest whole number.
Break-even cases of Rose
Break-even cases of Violet
X cases
X cases
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Step 1: Introduction to CVP Analysis
VIEW Step 2: Statement showing calculation of overhead cost per unit under conventional approach
VIEW Step 3: Calculation of break-even point under conventional approach
VIEW Step 4: Statement showing calculation of overhead cost per unit under activity-based approach
VIEW Step 5: Calculation of break-even point under activity-based approach
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