Part A: Note: You must complete part A before completing parts B and C. Genuine Spice Inc. began operations on January 1 of the current year. The company produces eight- 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 Direct Materials 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 Cost DIRECT LABOR Time Labor Rate Direct Labor Department Behavior per Case 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 The management of Genuine Spice Inc. wants 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: Case Production Utility Total Cost January 500 $600 February 800 660 March 1,200 740 April 1,100. 720 May 950 690 June 1,025 705 Required: 1. Determine the fixed and variable portion of the utility cost using the high-low method. Round the per unit cost to the nearest cent. At High Point At Low Point Variable cost per unit Total fixed cost Total cost 2. Determine the contribution margin per case. Enter your answer to the nearest cent. Contribution margin per case 3. Determine the fixed costs per month, including the utility fixed cost from part (1). Utilities cost (from part 1) Facility lease Equipment depreciation Supplies Total fixed costs 4. Determine the break-even number of cases per month. cases Comprehensive Problem 5 Part B: Note: This section is a continuation from Part A of the comprehensive problem. Be sure you have completed Part A before attempting Part B. You may have to refer back to data presented in Part A and use answers from Part A when completing this section. Genuine Spice Inc. began operations on January 1 of the current year. The company produces eight-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 Cost Time Labor Rate Direct Labor Department Behavior per Case per Hour Cost per Case DIRECT LABOR Department Cost Behavior Time Labor Rate Direct Labor per Case 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 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: Case Cost Estimated finished goods inventory, August 1 Desired finished goods inventory, August 31 300 $12,000 175 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: 5. Prepare the August production budget. Enter all amounts as positive numbers. Genuine Spice Inc. Production Budget For the Month Ended August 31 Expected cases to be sold Cases Plus desired ending inventory Total units required Less estimated beginning inventory Total units to be produced 6. Prepare the August direct materials purchases budget. Enter the unit price to the nearest cent. Enter all amounts as positive numbers: Genuine Spice Inc. Direct Materials Purchases Budget For the Month Ended August 31 Direct Materials Cream Base (ozs.) Natural Oils (ozs.) Bottles (bottles) Total Units required for production Plus desired ending inventory Total units required Less estimated beginning inventory Total materials to be purchased Unit price Total direct materials to be purchased i 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. Hours required for production: Hand and body lotion Hourly rate Total direct labor cost Genuine Spice Inc. Direct Labor Cost Budget For the Month Ended August 31 Mixing Filling Total 8. Prepare the August factory overhead cost budget. If an amount box does not require an entry, leave it blank. Factory overhead: Utilities Facility lease Equipment depreciation Supplies < Total factory overhead cost Genuine Spice Inc. Factory Overhead Cost Budget For the Month Ended August 31 Fixed Variable Total 9. Prepare the August budgeted income statement, including selling expenses. Enter all amounts as positive numbers. 9. Prepare the August budgeted income statement, including selling expenses. Enter all amounts as positive numbers. Genuine Spice Inc. Budgeted Income Statement For the Month Ended August 31 Sales Finished goods inventory, August 1 Direct Materials: Direct materials inventory, August 1 Direct materials purchases Cost of direct materials available for use Less direct materials inventory, August 31 Cost of direct materials placed in production Direct labor Factory overhead Cost of goods manufactured Cost of finished goods available for sale Less finished goods inventory August 31, Sales Finished goods inventory, August 1 Direct Materials: Direct materials inventory, August 1 Direct materials purchases Cost of direct materials available for use Less direct materials inventory, August 31 Cost of direct materials placed in production Direct labor Factory overhead