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Genuine Spice Inc. began operations on January 1 of the current year. The company produces eight- 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 ozs. $0.02 $2.00 Natural oils Variable 30 ozs. 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 5 14.40 1.20 25 min. $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 ABreak-Even Analysis

The management of Genuine Spice Inc. wants 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:

	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 portion of the utility cost using the high-low method. Round the per unit cost to the nearest cent.

	At High Point	At 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.

Contribution margin per case $ ??

3. Determine the fixed costs per month, including the utility fixed cost from part (1).

Utilities cost (from part 1)	$fill in the blank 8
Facility lease	fill in the blank 9
Equipment depreciation	fill in the blank 10
Supplies	fill in the blank 11
Total fixed costs	$fill in the blank 12

4. Determine the break-even number of cases per month. How many cases??

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