Comprehensive Problem 5 Part B: Note: This section is a continuation from Part A of the comprehensive problem. Be sure you have completed Part A before attempting Part B. You may have to refer back to data presented in Part A and use answers from Part A when completing this section. Natural Fragrance, Inc., began operations on January 1, 2012. The company produces a hand and body lotion in an eight-ounce bottle called Eternal Beauty. The lotion is sold wholesale in 12-bottle cases for $80 per case. There is a selling commission of $16 per case. The January direct materials, direct labor, and factory overhead costs are as follows: Part B- August Budgets During July of the current year, the management of Natural Fragrance, Inc., asked the controller to prepare August manufacturing and income statement budgets. Demand was expected to be 1,300 cases at $80 per case for August. Inventory planning information is provided as follows: 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. Instructions: 5. Prepare the August production budget. Enter all amounts as positive numbers. NATURAL FRAGRANCE, INC. Production Budget For the Month Ended August 31, 2012 Cases Expected cases to be sold Plus Desired ending inventory Total Less Estimated beginning inventory Total units to be produced 6. Prepare the August direct materials purchases budget. Enter the unit price as dollars and cents but carry out to three decimal places. For example, enter .2357 as 0.236 and enter 3.61 as 3.610. Enter all amounts as positive numbers. NATURAL FRAGRANCE, INC. Direct Materials Purchases Budget For the Month Ended August 31, 2012 Cream Base (ozs.) Natural Oils (ozs.) Bottles (bottles) Total Units required for production Plus: Desired ending inventory Less: Estimated beginning inventory Direct materials to be purchased Unit price Total direct materials to be purchased 7. Prepare the August direct labor budget. For hours required, round to nearest whole hour. For hourly rate, enter the amount as rounded to nearest whole dollar. NATURAL FRAGRANCE, INC. Direct Labor Budget For the Month Ended August 31, 2012 Hours required for production: Mixing Filling Total Hours required for production: Hand and body lotion Hourly rate Total direct labor cost 8. Prepare the August factory overhead budget. If an amount box does not require an entry, enter "0". NATURAL FRAGRANCE, INC. Factory Overhead Budget For the Month Ended August 31, 2012 Factory overhead: Fixed Variable Total Utilities Facility Lease Equipment Depreciation Supplies Total 9. Prepare the August budgeted income statement, including selling expenses. Enter all amounts as positive numbers. NATURAL FRAGRANCE, INC. Budgeted Income Statement For the Month Ended August 31, 2012 Sales Finished goods inventory, August 1 Direct materials inventory, August 1 Direct materials purchases [from part (6)] Less direct materials inventory, August 31 Cost of direct materials for production Direct labor [from part (7)] Factory overhead [from part (8)] Less finished goods inventory, August 31 Cost of goods sold Gross profit Selling expenses Income before income tax