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Instructions: 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

Instructions:

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

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

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 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:

Cases

Cost

Estimated finished goods inventory, August 1

300

$12,000

Desired finished goods inventory, August 31

175

7,000

Materials Inventory:

Cream Base

Oils

Bottles

(ozs.)

(ozs.)

(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-Part B:

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.

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.

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

$

Income before income tax

$

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