Question
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: | |
| 5. | Prepare the August production budget.* |
Production Budget:
5. Prepare the August production budget. For those boxes in which you must enter subtractive or negative numbers use a minus sign.
| Genuine Spice Inc. | |
| Production Budget | |
| For the Month Ended August 31 | |
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