Natural Fragrance, Inc., began operations on January 1, 2012. The company produces a hand and bod...1 answer below »

Natural Fragrance, Inc., began operations on January 1, 2012.
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:

Part A - Break-Even Analysis

The management of Natural Fragrance, 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:

Instructions:

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

$

$

Total Fixed Cost

$

$

Total Cost

$

$

2. Determine the contribution margin per case.
Enter your answer to the nearest cent. 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 answers
to the nearest whole number. 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. Round your answer to the nearest whole number.
cases

DIRECT MATERIALS Cost: Units Cost Direct Materials Behavior per Case per Unit Cost per Case variable 1.08 Cream base 72 oz $0.015 Natural oils Variable 24 ozs. 0.250 6.00 12 bottles 0.400 480 Bottle (8-oz) Variable $11.88 DIRECT LABOR Labor Rate Cost Time Direct Labor Department Behavior per Case per Hour Cost per Case Mixing Variable 16.8 min. $15.00 $4.20 Variable Filling 4.2 12.00 0.84 21.0 min. $5.04 FACTORY OVERHEAD Cost Behavior Total Cost Utilities Mixed 230 12,043 Facility lease Fixed Equipment depreciation Fixed 3,600 Supplies Fixed 600 $16,473

1 Approved Answer

Mohammad Z
answered on
June 26, 2020

5
Ratings,(13 Votes)

Here's how hi-low method works. It's easier to understand if you know an answer and can look at it worked backwards. You're always picking out the...

## 1 Approved Answer

June 26, 2020Here's how hi-low method works. It's easier to understand if you know an answer and can look at it worked backwards. You're always picking out the...

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