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 BehaviorUnits per CaseCost per UnitCost per CaseCream baseVariable100 ozs.$0.02$2.00Natural oilsVariable30 ozs.0.309.00Bottle (8-oz.)Variable12 bottles0.506.00

$17.00

DIRECT LABORDepartmentCost BehaviorTime per CaseLabor Rate per HourCost per CaseMixingVariable20 min.$18.00$6.00FillingVariable 514.401.20 25 min.

$7.20

FACTORY OVERHEAD Cost BehaviorTotal CostUtilitiesMixed$600Facility leaseFixed14,000Equipment depreciationFixed4,300SuppliesFixed660

$19,560

Part ABreak-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:

MonthCase ProductionUtility Total CostJanuary500$600February800660March1,200740April1,100720May950690June1,025705 Required-Part A:1.Determine the fixed and variable portions of the utility cost using the high-low method. Round your per unit cost to two decimal places.2.Determine the contribution margin per case. Round your answer to two decimal places.3.Determine the fixed costs per month, including the utility fixed cost from part (1). Refer to the lists of Amount Descriptions for the exact wording of the answer choices for text entries.4.Determine the break-even number of cases per month.

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:

CasesCostEstimated finished goods inventory, August 1300$12,000Desired finished goods inventory, August 311757,000

Materials Inventory:

Cream BaseOilsBottles(ozs.)(ozs.)(bottles)Estimated materials inventory, August 1250290600Desired materials inventory, August 311,000360240

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-Part B:5.Prepare the August production budget.*6.Prepare the August direct materials purchases budget.*7.Prepare the August direct labor budget. Round the hours required for production to the nearest hour.8.Prepare the August factory overhead budget. If an amount box does not require an entry, leave it blank. (Entries of zero (0) will be cleared automatically by CNOW.)9.

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

*For those boxes in which you must enter subtractive or negative numbers use a minus sign.

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 MaterialsPrice per UnitQuantity per CaseCream base$0.016 per oz.102 ozs.Natural oils$0.32 per oz.31 ozs.Bottle (8-oz.)$0.42 per bottle12.5 bottles Actual DirectActual Direct LaborLabor RateTime per CaseMixing$18.2019.50 min.Filling14.005.60 min.Actual variable overhead$305.00Normal volume1,600 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.

Required-Part C:10.Determine and interpret the direct materials price and quantity variances for the three materials. Round your price values for Cream Base to three decimal places and Natural Oils & Bottles to two decimal places.*11.Determine and interpret the direct labor rate and time variances for the two departments. Do not round hours. Round your answers to two decimal places.*12.Determine and interpret the factory overhead controllable variance.*13.Determine and interpret the factory overhead volume variance. Round rate to four decimal places and round your final answer to two decimal places.*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)? *For those boxes in which you must enter subtractive or negative numbers use a minus sign. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.