Reference no: EM133078582
Question - CVP with Activity-Based Costing and Multiple Products - Busy-Bee Baking Company produces a variety of breads. The plant manager would like to expand production into sweet rolls as well. The average price of a loaf of bread is $1. Anticipated price for a package of sweet rolls is $1.50. Costs for the new level of production are as follows:
|
Cost Driver
|
Unit Variable Cost
|
Level of Cost Driver
|
|
Loaf of bread
|
$0.65
|
-
|
|
Package of sweet rolls
|
$0.93
|
-
|
|
Setups
|
$300
|
250
|
|
Maintenance hours
|
$15
|
3,500
|
Other data:
Total fixed costs (traditional) $185,000
Total fixed costs (ABC) 57,500
Busy-Bee believes it can sell 600,000 loaves of bread and 200,000 packages of sweet rolls in the coming year.
Required -
1. Prepare a contribution-margin-based income statement for next year. Be sure to show sales and variable costs by product and in total.
2. Compute the break-even sales for the company as a whole using conventional analysis.
3. Compute the break-even sales for the company as a whole using activity-based analysis.
4. Compute the break-even units of each product in units. In your computations, round amounts to the nearest cent. Round your final answers to the nearest whole number of units.
Does it matter whether you use conventional analysis or activity-based analysis? Yes or No
5. Suppose that Busy-Bee could reduce the setup cost by $100 per setup and could reduce the number of maintenance hours needed to 1,000. How many units of each product must be sold to break even in this case? Round your answer up to the next higher whole unit (for example, 50.3 units rounds to 51). In your computations, round amounts to three decimal places.