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) 54,500 10,900 Selling price per case $101 $78 Direct labor hours 32,000 6,200 Machine hours 10,100 2,950 Receiving orders 51 28 Packing orders 95 51 Material cost per case $53 $42 Direct labor cost per case $12 $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 $ — $181,010 Machine costs 198,000* 251,840 Receiving department 244,500 — Packing department 106,500 — Total costs $549,000 $432,850 * All depreciation 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.