Maurice Tutor

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    Argosy University/ Phoniex University/
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    Phoniex University
    Oct-2001 - Nov-2016

Category > Accounting Posted 11 Aug 2017 My Price 11.00

Royal Essentials, Inc

Royal Essentials, Inc. Begin operations on January 1, 2008. 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 cost are as follows:

Direct Materials


..... Cost Behavior....Units Per Case....Cost per unit...Direct Materials cost per case
Cream base variable....72 ozs. ..............$0.015 ..............$1.08
Natural oils ...variable....24 ozs. ...............0.250 ................6.00
Bottle (8oz.) ..variable... 12 bottles ..........0.400 ................4.80
.................................................. .................................$11.88

Direct Labor


Dept. ..Cost Behavior..Time per case..Labor Rate Per hour..Direct Labor Cost per case

The Problem:
The management of Royal Essentials, 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.
2008.................Case Production........................Utility Total Cost....................
January........................300................ .........................$230
February.......................600................ ..........................265
March.........................1,000............... ..........................300
April.............................900............. .............................292
May..............................750.............. ...........................275
June.............................825.............. ...........................280
Instructions:
1. Determine the fixed and variable portion of the utility cost using the high-low method.
This is what I came up with, is this correct? $200. Fixed cost and a .10 per unit variable cost.

2. Determine the contribution margin cost per case.
11.88 + 5.04 + .10 = $17.02 variable cost per case minus $80. Sales per case =$62.98
Is this correct?

3. Determine the fixed cost per month, including the utility fixed cost.
Utility 200 plus facility lease 9,694 plus equipment depreciation 3,600, plus supplies 600 =14.094
Is this correct?
4. Determine the break-even number of cases per month.
This is what I came up with: 14094/ 96 =146.8 cases per month.
Is this correct?

Answers

Maurice Tutor
(5)
Status NEW Posted 11 Aug 2017 01:08 PM My Price 11.00

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