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.

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	Direct Materials 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	Direct Labor 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 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 (ozs.)	Oils (ozs.)	Bottles (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:

5. Prepare the August production budget.

Genuine Spice Inc. Production Budget For the Month Ended August 31
	Cases
Expected cases to be sold	fill in the blank 2
Desired ending inventory	fill in the blank 4
Total units available	fill in the blank 6
Estimated beginning inventory	fill in the blank 8
Total units to be produced	fill in the blank 10

6. Prepare the August direct materials purchases budget. Enter the unit price to the nearest cent.

Genuine Spice Inc. Direct Materials Purchases Budget For the Month Ended August 31
	Cream Base (ozs.)			Natural Oils (ozs.)			Bottles (bottles)			Total
Units required for production	fill in the blank 12			fill in the blank 13			fill in the blank 14
Desired ending inventory	fill in the blank 16			fill in the blank 17			fill in the blank 18
Estimated beginning inventory	fill in the blank 20			fill in the blank 21			fill in the blank 22
Direct materials to be purchased	fill in the blank 24			fill in the blank 25			fill in the blank 26
Unit price	$fill in the blank 28			$fill in the blank 29			$fill in the blank 30
Total direct materials to be purchased	$fill in the blank 32			$fill in the blank 33			$fill in the blank 34			$fill in the blank 35

7. Prepare the August direct labor cost budget. For hours required, round to nearest whole hour. For hourly rate, enter to the nearest cent, if required.

Genuine Spice Inc. Direct Labor Cost Budget For the Month Ended August 31
	Mixing		Filling		Total
Hours required for production of:
Hand and body lotion	fill in the blank 37		fill in the blank 38
Hourly rate	$fill in the blank 40		$fill in the blank 41
Total direct labor cost	$fill in the blank 43		$fill in the blank 44		$fill in the blank 45

8. Prepare the August factory overhead cost budget. If an amount box does not require an entry, leave it blank.

Genuine Spice Inc. Factory Overhead Cost Budget For the Month Ended August 31
	Fixed		Variable		Total
Factory overhead:
Utilities	$fill in the blank 47		$fill in the blank 48		$fill in the blank 49
Facility lease	fill in the blank 51		fill in the blank 52		fill in the blank 53
Equipment depreciation	fill in the blank 55		fill in the blank 56		fill in the blank 57
Supplies	fill in the blank 59		fill in the blank 60		fill in the blank 61
Total	$fill in the blank 62		$fill in the blank 63		$fill in the blank 64

9. Prepare the August budgeted income statement, including selling expenses.

Genuine Spice Inc. Budgeted Income Statement For the Month Ended August 31
Sales				$fill in the blank 66
Finished goods inventory, August 1			$fill in the blank 68
	Direct materials inventory, August 1	$fill in the blank 70
	Direct materials purchases	fill in the blank 72
	Direct materials inventory, August 31	fill in the blank 74
	Cost of direct materials for production	$fill in the blank 76
	Direct labor	fill in the blank 78
	Factory overhead	fill in the blank 80	fill in the blank 81
Finished goods inventory, August 31			fill in the blank 83
Cost of goods sold				fill in the blank 85
Gross profit				$fill in the blank 87
Selling expenses				fill in the blank 89
Operating income				$fill in the blank 91