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 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 100 ozs. $0.02 $2.00 Variable Variable Natural oils 30 ozs. 0.30 9.00 Bottle (8-oz.) Variable 12 bottles 0.50 6.00 $17.00 Department Cost Behavior DIRECT LABOR Time per Case 20 min. . Labor Rate per Hour Direct Labor Cost per Case Mixing $18.00 $6.00 Variable Variable Filling 5 14.40 1.20 25 min. $7.20 FACTORY OVERHEAD Utilities Cost Behavior Total Cost Mixed $600 Fixed 14,000 Facility lease Equipment depreciation Fixed 4,300 Supplies Fixed 660 $19,560 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 300 $12,000 Estimated finished goods inventory, August 1 Desired finished goods inventory, August 31 175 7,000 Materials Inventory: Cream Base (ozs.) Oils (ozs.) 290 Bottles (bottles) 250 600 Estimated materials inventory, August 1 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. Comprehensive Problem 5 Part A: Note: You must complete part A before completing parts B and C. 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 Units Cost Cost Behavior Direct Materials Cost per Case per Case per Unit Cream base Variable 100 ozs. $0.02 $2.00 30 ozs. 0.30 9.00 Natural oils Bottle (8-oz.) Variable Variable 12 bottles 0.50 6.00 $17.00 DIRECT LABOR Department Time per Case Labor Rate per Hour Direct Labor Cost per Case Cost Behavior Variable Variable Mixing 20 min. $18.00 $6.00 Filling 5 14.40 1.20 25 min. $7.20 - FACTORY OVERHEAD Utilities Cost Behavior Total Cost Mixed $600 Fixed 14,000 Fixed 4,300 Facility lease Equipment depreciation Supplies Fixed 660 $19,560 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 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 500 $600 January February 800 660 March 1,200 740 1,100 720 April May June 950 690 1,025 705 Comprehensive Problem 5 Part C: Note: This section is a continuation from Parts A and B of the comprehensive problem. Be sure you have completed Parts A and B before attempting Part C. You may have to refer back to data presented in Parts A and B as well as use answers from those parts 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 Units Cost Behavior Cost per Unit Direct Materials Cost per Case per Case Cream base 100 ozs. $0.02 $2.00 Variable Variable Natural oils 0.30 9.00 30 ozs. 12 bottles Bottle (8-oz.) Variable 0.50 6.00 $17.00 DIRECT LABOR Labor Rate Department Cost Behavior Time per Case Direct Labor Cost per Case per Hour Mixing Variable 20 min. $18.00 $6.00 Filling Variable 5 14.40 1.20 25 min. $7.20 FACTORY OVERHEAD Utilities Cost Behavior Total Cost Mixed $600 Fixed 14,000 Fixed 4,300 Facility lease Equipment depreciation Supplies Fixed 660 . $19,560 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 Actual Direct Materials Price per Unit Quantity per Case Cream base $0.016 per oz. 102 ozs. Natural oils 31 ozs. $0.32 per oz. $0.42 per bottle Bottle (8-oz.) 12.5 bottles Actual Direct Labor Rate Actual Direct Labor 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. 11. Determine the direct labor rate and time variances for the two departments. Do not round hours. Enter the costs in dollars and cents. Direct Labor Rate Variance: Mixing Department Filling Department Actual rate Standard rate Difference Actual time (hours) X Direct labor rate variance Indicate if favorable or unfavorable Direct Labor Time Variance: Mixing Department Filling Department Actual time (hours) Standard time (hours) Difference Standard rate xs XS Direct labor time variance s Indicate if favorable or unfavorable 12. Determine the factory overhead controllable variance. Actual variable overhead Variable overhead at standard cost Factory overhead controllable variance Indicate if favorable or unfavorable 13. Determine the factory overhead volume variance. Round rate to four decimal places and round your final answer to two decimal places. Normal volume (cases) Actual volume (cases) Difference Fixed factory overhead rate Factory overhead volume variance Indicate if favorable or unfavorable 14. The production volume of cases was planned at the beginning of August. The variances compare the actual cost and the standard cost of for the month. Thus, the standard cost must be based on the units of actual production