Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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

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
Products 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
Total direct materials cost per case $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 min. 14.40 1.20
Total direct labor cost per case 25 min. $7.20

FACTORY OVERHEAD
Line Item Description Cost Behavior Total Cost
Utilities Mixed $600
Facility lease Fixed 14,000
Equipment depreciation Fixed 4,300
Supplies Fixed 660
Total cost $19,560

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:

Line Item Description Cases Cost
Estimated finished goods inventory, August 1 300 $12,000
Desired finished goods inventory, August 31 175 7,000

Materials Inventory:

Line Item Description 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.

image text in transcribed

image text in transcribed

6. Prepare the August direct materials purchases budget. Enter the unit price to the nearest cent. 8. Prepare the August factory overhead cost budget. If an amount box does not require an entry, leave it blank

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_step_2

Step: 3

blur-text-image_step3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

More Books

Students also viewed these Accounting questions