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 eight 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 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 Actual Direct Materials 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 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 from 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 10 Determine and interpret the direct materials price and quantity variances for the three materials Enter the costs in dollars and cents (carried to three decimal places when required) Enter all amounts as positive numbers Direct Materials Price Variance Cream Base Natural Oils Bottles Actual price $fill in the blank 1 $fill in the blank 2 $fill in the blank 3 Standard price fill in the blank 4 fill in the blank 5 fill in the blank 6 Difference $fill in the blank 7 $fill in the blank 8 $fill in the blank 9 Actual quantity (units) Xfill in the blank 10 ozs Xfill in the blank 11 ozs Xfill in the blank 12 btls Direct materials price variance $fill in the blank 13 $fill in the blank 14 $fill in the blank 15 Indicate if favorable or unfavorable Enter the standard price to two decimal places Direct Materials Quantity Variance Cream Base Natural Oils Bottles Actual quantity fill in the blank 19 ozs fill in the blank 20 ozs fill in the blank 21 btls Standard quantity fill in the blank 22 fill in the blank 23 fill in the blank 24 Difference fill in the blank 25 ozs fill in the blank 26 ozs fill in the blank 27 btls Standard price X $fill in the blank 28 X $fill in the blank 29 X $fill in the blank 30 Direct materials quantity variance $fill in the blank 31 $fill in the blank 32 $fill in the blank 33 Indicate if favorable or unfavorable The fluctuation in caused the direct material price variances All the quantity variances were indicating 11 Determine and interpret the direct labor rate and time variances for the two departments Do not round hours Enter the costs in dollars and cents Enter all amounts as positive numbers Direct Labor Rate Variance Mixing Department Filling Department Actual rate $fill in the blank 40 $fill in the blank 41 Standard rate fill in the blank 42 fill in the blank 43 Difference $fill in the blank 44 $fill in the blank 45 Actual time (hours) Xfill in the blank 46 Xfill in the blank 47 Direct labor rate variance $fill in the blank 48 $fill in the blank 49 Indicate if favorable or unfavorable Direct Labor Time Variance Mixing Department Filling Department Actual time (hours) fill in the blank 52 fill in the blank 53 Standard time (hours) fill in the blank 54 fill in the blank 55 Difference fill in the blank 56 fill in the blank 57 Standard rate X $fill in the blank 58 X $fill in the blank 59 Direct labor time variance $fill in the blank 60 $fill in the blank 61 Indicate if favorable or unfavorable 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 Enter all amounts as positive numbers Actual variable overhead $fill in the blank 66 Variable overhead at standard cost fill in the blank 67 Factory overhead controllable variance $fill in the blank 68 Indicate if favorable or unfavorable The factory overhead controllable variance was caused by the variance in 13 Determine and interpret the factory overhead volume variance When determining the fixed factory overhead rate, round the factory overhead rate to two decimal places and the factory overhead volume variance to whole dollars Enter all amounts as positive numbers Normal volume (cases) fill in the blank 71 Actual volume (cases) fill in the blank 72 Difference fill in the blank 73 Fixed factory overhead rate $fill in the blank 74 Factory overhead volume variance $fill in the blank 75 Indicate if favorable or unfavorable The volume variance indicates the cost of 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)

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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

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 eight- 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 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		Actual Direct Materials 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 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 from 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:

10. Determine and interpret the direct materials price and quantity variances for the three materials. Enter the costs in dollars and cents (carried to three decimal places when required). Enter all amounts as positive numbers.

Direct Materials Price Variance:
	Cream Base		Natural Oils		Bottles
Actual price	$fill in the blank 1		$fill in the blank 2		$fill in the blank 3
Standard price	fill in the blank 4		fill in the blank 5		fill in the blank 6
Difference	$fill in the blank 7		$fill in the blank 8		$fill in the blank 9
Actual quantity (units)	Xfill in the blank 10	ozs.	Xfill in the blank 11	ozs.	Xfill in the blank 12	btls.
Direct materials price variance	$fill in the blank 13		$fill in the blank 14		$fill in the blank 15
Indicate if favorable or unfavorable

Enter the standard price to two decimal places.

Direct Materials Quantity Variance:
	Cream Base		Natural Oils		Bottles
Actual quantity	fill in the blank 19	ozs.	fill in the blank 20	ozs.	fill in the blank 21	btls.
Standard quantity	fill in the blank 22		fill in the blank 23		fill in the blank 24
Difference	fill in the blank 25	ozs.	fill in the blank 26	ozs.	fill in the blank 27	btls.
Standard price	X $fill in the blank 28		X $fill in the blank 29		X $fill in the blank 30
Direct materials quantity variance	$fill in the blank 31		$fill in the blank 32		$fill in the blank 33
Indicate if favorable or unfavorable

The fluctuation in

caused the direct material price variances. All the quantity variances were indicating

11. Determine and interpret the direct labor rate and time variances for the two departments. Do not round hours. Enter the costs in dollars and cents. Enter all amounts as positive numbers.

Direct Labor Rate Variance:
	Mixing Department	Filling Department
Actual rate	$fill in the blank 40	$fill in the blank 41
Standard rate	fill in the blank 42	fill in the blank 43
Difference	$fill in the blank 44	$fill in the blank 45
Actual time (hours)	Xfill in the blank 46	Xfill in the blank 47
Direct labor rate variance	$fill in the blank 48	$fill in the blank 49
Indicate if favorable or unfavorable

Direct Labor Time Variance:
	Mixing Department	Filling Department
Actual time (hours)	fill in the blank 52	fill in the blank 53
Standard time (hours)	fill in the blank 54	fill in the blank 55
Difference	fill in the blank 56	fill in the blank 57
Standard rate	X $fill in the blank 58	X $fill in the blank 59
Direct labor time variance	$fill in the blank 60	$fill in the blank 61
Indicate if favorable or unfavorable

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. Enter all amounts as positive numbers.

Actual variable overhead	$fill in the blank 66
Variable overhead at standard cost	fill in the blank 67
Factory overhead controllable variance	$fill in the blank 68
Indicate if favorable or unfavorable

The factory overhead controllable variance was caused by the variance in

13. Determine and interpret the factory overhead volume variance. When determining the fixed factory overhead rate, round the factory overhead rate to two decimal places and the factory overhead volume variance to whole dollars. Enter all amounts as positive numbers.

Normal volume (cases)	fill in the blank 71
Actual volume (cases)	fill in the blank 72
Difference	fill in the blank 73
Fixed factory overhead rate	$fill in the blank 74
Factory overhead volume variance	$fill in the blank 75
Indicate if favorable or unfavorable

The volume variance indicates the cost of

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)?