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
Direct Materials Cost per Case
Cream base
Variable
100 oz.
$0.02
$2.00
Natural oils
Variable
30 oz.
$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
Direct Labor Cost per Case
Mixing
Variable
20 min.
$18.00
$6.00
Filling
Variable
25 min.
$14.40
$1.20
$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
Part A—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 the per unit cost to the nearest cent.
At the High Point
At the Low Point
Variable cost per unit
$fill in the blank 1
$fill in the blank 2
Total fixed cost
fill in the blank 3
fill in the blank 4
Total cost
fill in the blank 5
fill in the blank 6
2. Determine the contribution margin per case. Enter your answer to the nearest cent.