ABC AND CVP ANALYSIS: MULTIPLE PRODUCTS

Good Scent, Inc., produces two colognes: Rose and Violet. Of the two, Rose is more popular. Data concerning the two products follow:

Rose
Violet
Expected sales (in cases)
50,000
10,000
Selling price per case
$100
$80
Direct labor hours
36,000
6,000
Machine hours
10,000
3,000
Receiving orders
50
25
Packing orders
100
50
Material cost per case
$50
$43
Direct labor cost per case
$10
$7
The company uses a conventional costing system and assigns overhead costs to products using direct labor hours. Annual overhead costs follow. They are classified as fixed or variable with respect to direct labor hours.

Fixed
Variable
Direct labor benefits
$ —
$200,000
Machine costs
200,000
262,000
Receiving department
225,000
—
Packing department Total costs
125,000
—
$550,000
$462,000
Required:
1. Using the conventional approach, compute the number of cases of Rose and the number of cases of Violet that must be sold for the company to break even.
2. Using an activity-based approach, compute the number of cases of each product that must be sold for the company to break even.