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. $$0\mathrm{.}02$ $$2\mathrm{.}00$ Natural oils Variable $30$ ozs. $0\mathrm{.}309\mathrm{.}00$ Bottle $(8-$oz$.)$ Variable $12$ bottles $0\mathrm{.}506\mathrm{.}00$ $$17\mathrm{.}00$ DIRECT LABOR Department Cost Behavior Time per Case Labor Rate per Hour Direct Labor Cost per Case Mixing Variable $20$ min. $$18\mathrm{.}00$ $$6\mathrm{.}00$ Filling Variable $514\mathrm{.}401\mathrm{.}2025$ min. $$7\mathrm{.}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 C$$August Variance Analysis During September of the current year, the controller was asked to perform variance analyses for August. The January operating data provided the standard prices, rates, times, and quantities per case. There were $1,500$ actual cases produced during August, which was $250$ more cases than planned at the beginning of the month. Actual data for August were as follows: Actual Direct Materials Price per Unit Actual Direct Materials Quantity per Case Cream base $$0\mathrm{.}016$ per oz$.102$ ozs. Natural oils $$0\mathrm{.}32$ per oz$.31$ ozs. Bottle $(8-$oz$.)$ $$0\mathrm{.}42$ per bottle $12\mathrm{.}5$ bottles Actual Direct Labor Rate Actual Direct Labor Time per Case Mixing $$18\mathrm{.}2019\mathrm{.}50$ min. Filling $14\mathrm{.}005\mathrm{.}60$ min. Actual variable overhead $$305\mathrm{.}00$ Normal volume $1,600$ cases $****($Veriance C Quesations $10-14.)10.$ Determine and interpret the direct materials price and quantity variances for the three materials.

Additional Instruction

Direct Materials Price Variance

Cream Base Natural Oils Bottles

Actual price Correct

$$0\mathrm{.}016$

$$0\mathrm{.}32$

$$0\mathrm{.}42$

Standard price Correct

$-0\mathrm{.}020$

$-0\mathrm{.}30$

$-0\mathrm{.}50$

Difference

$-$$$0\mathrm{.}004$

$$0\mathrm{.}02$

$-$$$0\mathrm{.}08$

Actual quantity Correct

$153,000$

ozs. Correct

$46,500$

ozs. Correct

$18,750$

btls$.$ Correct

Direct materials price variance

$-$$$612$

F Correct

$$930$

U Correct

$-$$$1,500$

F Correct

Points:

$24/24$

Direct Materials Quantity Variance

Cream Base Natural Oils Bottles

Actual quantity Correct

$153,000$

ozs. Correct

$46,500$

ozs. Correct

$18,750$

btls$.$ Correct

Standard quantity Correct

$-150,000$

ozs. Correct

$-45,000$

ozs. Correct

$-18,000$

btls$.$ Correct

Difference

$3,000$

ozs. Correct

$1,500$

ozs. Correct

$750$

btls$.$ Correct

Standard price Correct

$$0\mathrm{.}02$

$$0\mathrm{.}30$

$$0\mathrm{.}50$

Direct materials quantity variance

$$60$

U Correct

$$450$

U Correct

$$375$

U Correct

Points:

$30/30$

The fluctuation in market prices Correct caused the direct material price variances. All the Direct material quantity variances were unfavorable Correct indicating some material losses, scrap, and quality rejections Correct $.$

Points:

$3/3$

Check My Work

$10.$ Direct Materials Price variance is the difference between the actual and standard prices, multiplied by the actual quantity. Direct Materials Quantity variance is the difference between the actual and standard quantities, multiplied by the standard price. What caused the price and quantity variances?

$11.$ Determine and interpret the direct labor rate and time variances for the two departments.

Additional Instructions

Direct Labor Rate Variance

Mixing Department Filling Department

Actual rate Correct

$$18\mathrm{.}20$

$$14\mathrm{.}00$

Standard rate Correct

$-18\mathrm{.}00$

$-14\mathrm{.}40$

Difference

$$0\mathrm{.}20$

$-$$$0\mathrm{.}40$

Actual time Correct

hrs$.$

$140\mathrm{.}0$

hrs$.$

Direct labor rate variance