Comprehensive Problem 5 Amount Descriptions Questions (Part A) Production Budget Instructions Genuine Spice Inc. began operations on January 1 of the current year. The company produces eight-ounce bottles of hand and body lotion called tema Beauty, The lotion is sold wholesale in 12 bottle cases for $100 percase. There is a selling commission of $20 percase. 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 G $0.02 $ 2.00 Natural oils Variable 30 0 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 Moding Variable 20 min $18.00 Fing Variable 14.40 FACTORY OVERHEAD Cost Behavior Total Cost Mixed 5600 Facility lease Fored 14.000 Equipment depreciation Fixed 4,300 Supplies Part A-Break-Even Analysis s cost, which is part of factory overhead, is a mod cost The management of Genuine Spice Inc. wants to determine the number of cases required to break even per month. The u The following information was gathered from the first six months of operation regarding this cost: Utility Total Cost January $600 February 660 March Case Production 500 800 1,200 1,100 950 1,025 740 April May June 705 Required-Part A: 1. Determine the red and variable portion of the 2 Determine the contribution margin per case cost using the high-ow method Part A-Break-even Analysis The management of Genuine Spice Inc. wants to determine the number of casos required to break even per month. The uses cost, which is part of factory overhead, is a mod cost The following information was gathered from the first six months of operation regarding this cost Case Production Utility Total Cost January 500 $800 February 660 March 1.200 740 April 1,100 950 1,025 720 690 May June Required-Part A: 1. Determine the fired and variable portion 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 titled cost from part (1) 4. Deformine the break-even number of cases per month Part B - August 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 $12,000 Estimated finished goods inventory, August 1 300 Part 8-August 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 Estimated finished goods inventory, August 1 Desired finished goods inventory, August 31 300 175 $12.000 ,000 7 Materials Inventory Oils Bottles (bottle) Cream Base (oz.) 250 1,000 290 Estimated materials inventory, August 1 Desired materials inventory, August 31 360 240 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 unitor 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 cost budget. Round the hours required for production to the nearest hour & Prepare the August factory overhead cost budget an amount box does not require an entry, love it blank (Entries of Zoro (O) will be cleared automatically by GNOW) 9. Prepare the August budgeted income statement, including selling experies. NOTE: Because you are not required to prepare a cost of goods Required-Part : 5. Prepare the August production budget." & Prpare the Augustor m etal purchases budget 7. Prepare the Augusterbar cost budget Hound the hours regned for production to the nearest hour 3. Prepare the August factory overhead cost budget an amount box does not require an entry lower bank Entries of roof) wil be cleared automatically by CNOW) 8. Prepare the August budgeted income statement, including saling expenses. NOTE: Because you are not required to prepare a cost of goods sold budget, the cost of goods sold calculations will be part of the budgeted income statement Enter all amounts as positive numbers. 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: Actual Direct Materials Price per Unit Quantity per Case Cream base $0.016 per or $0.32 poroz 0.42 per bottle 102 oz 31 oz Natural oils Bottle (8-oz.) 125 bottles Actual Direct Labor Rate $18.20 14,00 Actual Direct Labor Time per Case 19.50 min. 5.60 min Mixing Filling Part C-August Variance Analysis During September of the current year, the controler was asked to perform variance analyses for August The January operating data provided the standard roos, ratos, times, and quartes per case. There were 1,500 actual cases produced during August, which was 250 more than planned at the beginning of the month. Actual data for August were as Cream base Naturals Boe ) Actualit Materiale Price per Unit Quantity per Case $0.016 per oz. 1020 50.32 per or 0.42 per bottle 12.5 bottes Actual Direct Actual Direct Labor Labor Rate Time per Case MD Fing 540 14.00 5.50 min Actual variable overhead Normal volume $305.00 1,600 cases The prices of the materials were different from standard due to fluctuations in manat prices. The standard quantity of materials used percase was an ideal standard. The Mong Department used a higher grade labor classification during the month, thus causing the actual laborate to exced standard. The Feing Department used a lower grade labor classification during the month, thus causing the actual laborate to be less than standard Required-Part C: 10. Determine and interpret the direct materials price and quantity wariances for the three materials 11. Determine and interpret the direct labor rate and time variances or the departments. Round hours to the nearest 12. Determine and interpret the factory overhead controllable variance of an hour Required-Part C: 10. Determine and interpret the direct materials price and quality variances for the three materials 11. Determine and interpret the direct laborate and time varices for the two departments Pound hours to the nearest onth of an hour 12. Determine and interpret the factory overhead controllable variance 13. Dotormine 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 (1) 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) Amount Descriptions Amount Description Part A Controllable variance Equipment depreciation Facility lease Supplies Us Volume variance Questions (Part A) Questions (Part A) 1. Determine the fixed and variable portion of the utility cost using the high-low method. At High Point At Low Point Variable cost per unit Total fixed cost Total cost 2. Determine the contribution margin per case. $ 3. Determine the fixed costs per month, including the utility fixed cost from part (1). 1 Total fixed costs: 4. Determine the break-even number of cases per month. cases Production Budget Production Budget 5. Prepare the August production budget. Enter all amounts as positive numbers. Genuine Spice Inc. Production Budget For the Month Ended August 31 Total cases required Direct Materials Purchases Budget amounts as positive numbers 6. Prepare the August direct materials purchases budget Enter Genuine Spice Inc Direct Materials Purchases Budget For the Month Ended August 31 Direct Materials Purchases Budget 6. Prepare the August direct materials purchases budget. Entor al amounts as positive numbers Genuine Spice Inc. Direct Materials Purchases Budget For the Month Ended August 31 Cream Base (oz.) Natural Oils (oz.) Bottles (bottles) Direct materials to be purchased Direct Labor Cost Budget 7. Prepare the August de ber cost Budget Hound the hours required for production to the newest hour Enteral amounts as positive ubers Genuine Spice Inc Direct Labor Cost Budget For the Month Ended August 31 Mixing Filling Factory Overhead Cost Budget & Prepare the August factory overhead cost budget. Enter al amounts as positive numbers. If an amount box does not require an entry leave it blank (Entries of zero () will be cleared automatically by CNOW.) Genuine Spice Inc. Factory Overhead Cost Budget For the Month Ended August 31 Fixed Variable Total Factory overhead Utilities Facility lease Equipment depreciation Supplies