MY QUESTION IS AT THE VERY BOTTOM...
Royal Essentials, Inc. began 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 costs 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 (8 oz.) Variable 12 bottles $0.400 $4.80
$11.88
DIRECT LABOR
Cost Behavior Time per Case Labor Rate per Hour Direct Labor
Cost per Case
Mixing Variable 16.80 min $15.00 $4.20
Filling Variable 4.20 min $12.00 $0.84
21.00 min $5.04
FACTORY OVERHEAD
Cost Behavior Total Cost
Utilities Mixed $230
Facility Lease Fixed $9,694
Equipment Depreciation Fixed $3,600
Supplies Fixed $600
$14,124
Part A - Break-Even Analysis
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.
At High Point At Low Point
Variable Cost
Fixed Cost
Total Cost
2. Determine the contribution margin per case. Enter your answer in dollars and cents. Round to two decimal places. For example, 89.458 would be entered as 89.46
Contribution margin per case: $
3. Determine the fixed costs per month, including the utility fixed cost from part (1). Enter your answer as a whole number. Round to the nearest whole unit. For example, 89.45 would be entered as 89 and 89.56 would be entered as 90.
Utilities Cost (from part 1)
Facility Lease
Equipment Depreciation
Supplies
Total Fixed Costs
4. Determine the break-even number of cases per month.
cases
MY QUESTION IS, WHAT IS THE BREAK-EVEN NUMBER OF CASES PER MONTH?