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Genuine Spice Inc. began operations on January 1 of the current year. The company produces 8-ounce bottles of hand and body lotion called Eternal Beauty. The lotion is sold wholesale in 12-bottle cases for $100 per case. There is a selling commission of $20 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

Cost per Case

Cream base

Variable

100 ozs.

$0.02

$2.00

Natural oils

Variable

30 ozs.

0.30

9.00

Bottle (8-oz.)

Variable

12 bottles

0.50

6.00

$17.00

DIRECT LABOR

Department

Cost Behavior

Time per Case

Labor Rate per Hour

Cost per Case

Mixing

Variable

20 min.

$18.00

$6.00

Filling

Variable

5

14.40

1.20

25 min.

$7.20

FACTORY OVERHEAD

Cost Behavior

Total Cost

Utilities

Mixed

$600

Facility lease

Fixed

14,000

Equipment depreciation

Fixed

4,300

Supplies

Fixed

660

$19,560

Part ABreak-Even Analysis

The management of Genuine Spice 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:

Month

Case Production

Utility Total Cost

January

500

$600

February

800

660

March

1,200

740

April

1,100

720

May

950

690

June

1,025

705

	Required-Part A:
1.	Determine the fixed and variable portions of the utility cost using the high-low method.
2.	Determine the contribution margin per case.
3.	Determine the fixed costs per month, including the utility fixed cost from part (1).
4.	Determine the break-even number of cases per month.

Part BAugust Budgets

During July of the current year, the management of Genuine Spice Inc. asked the controller to prepare August manufacturing and income statement budgets. Demand was expected to be 1,500 cases at $100 per case for August. Inventory planning information is provided as follows:

Finished Goods Inventory:

Cases

Cost

Estimated finished goods inventory, August 1

300

$12,000

Desired finished goods inventory, August 31

175

7,000

Materials Inventory:

Cream Base

Oils

Bottles

(ozs.)

(ozs.)

(bottles)

Estimated materials inventory, August 1

250

290

600

Desired materials inventory, August 31

1,000

360

240

There was negligible work in process inventory assumed for either the beginning or end of the month; thus, none was assumed. In addition, there was no change in the cost per unit or estimated units per case operating data from January.

	Required-Part B:
5.	Prepare the August production budget.
6.	Prepare the August direct materials purchases budget.
7.	Prepare the August direct labor budget.
8.	Prepare the August factory overhead budget.
9.	Prepare the August budgeted income statement, including selling expenses.

Part CAugust Variance Analysis

During September of the current year, the controller was asked to perform variance analyses for August. The January operating data provided the standard prices, rates, times, and quantities per case. There were 1,500 actual cases produced during August, which was 250 more cases than planned at the beginning of the month. Actual data for August were as follows:

	Actual Direct Materials
	Price per Unit	Quantity per Case
Cream base	$0.016 per oz.	102 ozs.
Natural oils	$0.32 per oz.	31 ozs.
Bottle (8-oz.)	$0.42 per bottle	12.5 bottles

	Actual Direct	Actual Direct Labor
	Labor Rate	Time per Case
Mixing	$18.20	19.50 min.
Filling	14.00	5.60 min.

Actual variable overhead	$305.00
Normal volume	1,600 cases

The prices of the materials were different than standard due to fluctuations in market prices. The standard quantity of materials used per case was an ideal standard. The Mixing Department used a higher grade labor classification during the month, thus causing the actual labor rate to exceed standard. The Filling Department used a lower grade labor classification during the month, thus causing the actual labor rate to be less than standard.

	Required-Part C:
10.	Determine and interpret the direct materials price and quantity variances for the three materials.
11.	Determine and interpret the direct labor rate and time variances for the two departments.
12.	Determine and interpret the factory overhead controllable variance.
13.	Determine and interpret the factory overhead volume variance.
14.	Why are the standard direct labor and direct materials costs in the calculations for parts (10) and (11) based on the actual 1,500-case production volume rather than the planned 1,375 cases of production used in the budgets for parts (6) and (7)?

Geruine Spice Inc. begas operations on danuary 1 of the current year. The compary produces 8 ounce botties of hand and body lotion called Etemal Beauty. The lotion is sold wholesale in 12-bottle cases for $100 per case. There is a seiling commission of $20 per case. The January direct materials. direct labor, and tactory overhad costs are as folows: Part A-Break-Even Analysis The management of Genuine Spice inc. wishes to determine the number of cases required to break even per month. The ulaties cost, which is part of factory overhead, is a mixed cost. The folowing information was gathered Irom the fist sax months of operaton regarding this cost: Part A-Break-Even Analysis The management of Genuine Spice Inc. wishes to determine the number of cases recuiced to break. even per month. The utisties cost, which is part of tactory overhead, is a mined cost. The foliowing information was gathered from the first six months of operation regarding this cost: Required-Part A: 1. Determine the fived and yaninble portions of the uty cost using the high-low method. 2. Detemine the cantribufian marain per case. 3. Decermine the fored costs per month, including the umily fived eost from part (f). 4. Detemmine the break-even number of cases per month. Part B-August Budgets Duning July of the current year, the management of Genuine Spice lnc. asked the controller to prepare August manutacturing and income statement budgecs. Demand was expected to be 1,500: cases at $100 per case for August. Imventory planning information is provided as foliows: Finished Goods invertory: Materials inventory: There was negligible work in process inventory assumed for elther the beginning or ond of the month; thus. none was assumed. In addition, there was no change in the cost per unit or estimaled unizs per case operating data from January. Required-Part E: 5. Pregare the August produchan budget: 6. Prepare the August dinect materials punchases budget. Materials Inventory: There was negligible work in process inventory assumed for ether the beginning or end of the month; thus, none was assumed. In addition, there was no change in the cost per unit or estimated units per case operating data trom January. Required-Part B: 5. Prepare the August production budget. 6. Prepare the August direct materials purchases budget. 7. Prepare the August direct labor budget. 8. Prepare the August factory overhead budget. 9. Prepare the August budgeted income statement, including selling expenses. Part C-August Variance Analysis During September of the current year, the controller was asked to perform variance analyses for August. The January operating data provided the standard prices, rates, times, and quantities per case. There were 1,500 actual cases produced during August, which was 250 more cases than planned at the beginning of the month. Actual data for August were as follows: Required-Part B: 5. Prepare the August production budget. 6. Prepare the August direct materiais purchases budget. 7. Prepare the August direct labor budget. 8. Prepare the August factory overhead budgot. 9. Prepare the August budgeted income statement including selling expenses Part C-August Variance Analysis During Septermber of the current year, the controller was askod to perform variance analyses for August. The January operabing data provided the standard prices, rases, times, and quantios per case. There were 1,500 actual cases produced during August, which was 250 more cases than planned at the beginning of the month. Actual data for August were as tollows: The prices of the materials were ditferent than standard due to tluctuations in market prices. The standard quantify of materiats used per case was an ideal standard. The Moing Department used a higher grade labor classification during the month, thus causing the actual labor rate to oxceed standard. The Filing Department used a lower grade labor classification during the month, thus causing the actual labor rate to be less than standard. Aequired-Part C : 10. Deformine and inferpot the direct materials price and quantify variances for the three materials. 11. Determine and interpret the diroct fabor rate and time variances for the two departments 12. Defermine and interpret the factory overhead controllable variance. 13. Deremine and inferpret me factory overhead votume variance. 14. Why are the standard direct labor and direct materiats costs in the calculations for parts (10) and (11) based on the achual 1,500-case production volume rather than the planned 1,375 cases of production used in the budgets tor parts (6) and (7)? 10. Determine and interpret the direct materials price and quantity variances for the three materials. The fluctuation in caused the direct material price variances. All the Direct material quantity variances were indicating 11. Determine and interpret the direct labor rate and time variances for the two departments. 11. Determine and interpret the direct labor rate and time variances for the two departments. The change in the caused the labor rate variances. This change have been responsible for the direct labor time variance. 12. Determine and interpret the factory overhead controllable variance. The factory overhead controllabie variance was caused by the variance in 13. Determine and interpret the factory overhead volume variance. The change in the caused the labor rate variances. This change have been responsible for the direct labor time variance. 12. Determine and interpvet the factory overhead controllable variance. The factory overhead controllable variance was caused by the variance in 13. Determine and interpret the factory overhead volume variance. The volume variance indicates the cost of 14. Why are the standard direct labor and direct materials costs in the calculations for parts ( and (11) based on the actual 1,500-case production volume rather than the planned 1,375 ca. of production used in the budgets for parts (6) and (7)? The production volume of cases was planned at the beginning of August. TI variances compare the actual cost and the standard cost of for the montl Thus, the standard cost must be based on the units of actual production. 1. Determine the fixed and variable portions of the utitiy cost using the high-low method. 2. Determine the cantribution margin per case. per case 3. Dotermine the fixed costs per month, including the utility fixed cost from part (1). 4. Determine the break-even number of cases per month. cases 5. Prepare the August production budget. Additional Instruction 6. Prepare the August direct materials purchases budget. 7. Prepare the August direct labor budget. 8. Prepare the August factory overhead budget. 9. Prepare the August budgeted income statement, including selling expenses