• 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 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
  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
  Desired ending inventory
  Total units available
  Estimated beginning inventory
  Total units to be produced

  
  

  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
  Desired ending inventory
  Estimated beginning inventory
  Direct materials to be purchased
  Unit price	$			$			$
  Total direct materials to be purchased	$			$			$			$

  
  

  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
  Hourly rate	$		$
  Total direct labor cost	$		$		$

  
  

  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	$		$		$
  Facility lease
  Equipment depreciation
  Supplies
  Total	$		$		$

  
  

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

  
  

  Genuine Spice Inc. Budgeted Income Statement For the Month Ended August 31
  Sales				$
  Finished goods inventory, August 1			$
  	Direct materials inventory, August 1	$
  	Direct materials purchases
  	Direct materials inventory, August 31
  	Cost of direct materials for production	$
  	Direct labor
  	Factory overhead
  Finished goods inventory, August 31
  Cost of goods sold
  Gross profit				$
  Selling expenses
  Operating income				$