Part B:

1. Comprehensive Problem 5 Part C:

   Note: This section is a continuation from Parts A and B of the comprehensive problem. Be sure you have completed Parts A and B before attempting Part C. You may have to refer back to data presented in Parts A and B as well as use answers from those parts 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
   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		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 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 Materials Price per Unit		Actual Direct Materials Quantity per Case
   Cream base	$0.016	per oz.	102	ozs.
   Natural oils	$0.32	per oz.	31	ozs.
   Bottle (8-oz.)	$0.42	per bottle	12.5	bottles

   	Actual Direct Labor Rate	Actual Direct Labor Time per Case
   Mixing	$18.20	19.50 min.
   Filling	14.00	5.60 min.
   Actual variable overhead	$305.00
   Normal volume	1,600 cases

   The prices of the materials were different from 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:

   10. Determine and interpret the direct materials price and quantity variances for the three materials. Enter the costs in dollars and cents (carried to three decimal places when required). Enter all amounts as positive numbers.

   Direct Materials Price Variance:
   	Cream Base		Natural Oils		Bottles
   Actual price	$		$		$
   Standard price
   Difference	$		$		$
   Actual quantity (units)	X	ozs.	X	ozs.	X	btls.
   Direct materials price variance	$		$		$
   Indicate if favorable or unfavorable

   Enter the standard price to two decimal places.

   Direct Materials Quantity Variance:
   	Cream Base		Natural Oils		Bottles
   Actual quantity		ozs.		ozs.		btls.
   Standard quantity
   Difference		ozs.		ozs.		btls.
   Standard price	X $		X $		X $
   Direct materials quantity variance	$		$		$
   Indicate if favorable or unfavorable

   The fluctuation in caused the direct material price variances. All the quantity variances were indicating .

   11. Determine and interpret the direct labor rate and time variances for the two departments. Do not round hours. Enter the costs in dollars and cents. Enter all amounts as positive numbers.

   Direct Labor Rate Variance:
   	Mixing Department		Filling Department
   Actual rate	$		$
   Standard rate
   Difference	$		$
   Actual time (hours)	X		X
   Direct labor rate variance	$		$
   Indicate if favorable or unfavorable

   Direct Labor Time Variance:
   	Mixing Department		Filling Department
   Actual time (hours)
   Standard time (hours)
   Difference
   Standard rate	X $		X $
   Direct labor time variance	$		$
   Indicate if favorable or unfavorable

   The change in the caused the labor rate variances. This change have been responsible for the direct labor time variance.

   12. Determine and interpret the factory overhead controllable variance. Enter all amounts as positive numbers.

   Actual variable overhead	$
   Variable overhead at standard cost
   Factory overhead controllable variance	$
   Indicate if favorable or unfavorable

   The factory overhead controllable variance was caused by the variance in .

   13. Determine and interpret the factory overhead volume variance. When determining the fixed factory overhead rate, round the factory overhead rate to two decimal places and the factory overhead volume variance to whole dollars. Enter all amounts as positive numbers.

   Normal volume (cases)
   Actual volume (cases)
   Difference
   Fixed factory overhead rate	$
   Factory overhead volume variance	$
   Indicate if favorable or unfavorable

   The volume variance indicates the cost of .

   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)?

Check My Work1 more Check My Work uses remaining.

Prepare August production budget GS Inc. Production budget Expected cases to be sold (Plus) Desired ending inventory Total (Less) Estimated beginning inventory Total units to be produced Cases 1500 175 1675 300 1375 Total cases to be produced in August is 1.375 Prepare direct materials purchase budget GS Inc. Direct Materials Purchases Budget For the Month Ended August 31, 2014 Cream Base (ozs.) Natural Oils (ozs.) Bottles (bottles) Total 1375 | 100 | 137500 | 1375 30 41250 1375 | 12 | 16500 1000 360 240 Units required for production Plus desired ending inventory Less estimated beginning inventory Direct materials to be purchased Unit price Total direct materials to be purchased 250 290 600 138250 0.02 41320 0.3 16140 0.50 $2.765 $12.396 S8070 $23.231 Prepare direct labor budget Hours required for production of Hand and body lotion Hourly rate Total direct labor cost Mixing Filling | Total 458.33 115 $18 $14 $8,250 $1,650 $9.900 Prepare Factory overhead budget Fixed $500 $14,000 Variable $275 $0 Total $775 $14,000 | Factory overhead Utilities Facility Lease Equipment depreciation Supplies Total $4.300 $660 $19,460 $0 $4,300 $0 $660 $275 $19,735 Variable Utilities expense is 0.20x1375=$275 Fixed utility expense is $500 Prepare August production budget GS Inc. Production budget Expected cases to be sold (Plus) Desired ending inventory Total (Less) Estimated beginning inventory Total units to be produced Cases 1500 175 1675 300 1375 Total cases to be produced in August is 1.375 Prepare direct materials purchase budget GS Inc. Direct Materials Purchases Budget For the Month Ended August 31, 2014 Cream Base (ozs.) Natural Oils (ozs.) Bottles (bottles) Total 1375 | 100 | 137500 | 1375 30 41250 1375 | 12 | 16500 1000 360 240 Units required for production Plus desired ending inventory Less estimated beginning inventory Direct materials to be purchased Unit price Total direct materials to be purchased 250 290 600 138250 0.02 41320 0.3 16140 0.50 $2.765 $12.396 S8070 $23.231 Prepare direct labor budget Hours required for production of Hand and body lotion Hourly rate Total direct labor cost Mixing Filling | Total 458.33 115 $18 $14 $8,250 $1,650 $9.900 Prepare Factory overhead budget Fixed $500 $14,000 Variable $275 $0 Total $775 $14,000 | Factory overhead Utilities Facility Lease Equipment depreciation Supplies Total $4.300 $660 $19,460 $0 $4,300 $0 $660 $275 $19,735 Variable Utilities expense is 0.20x1375=$275 Fixed utility expense is $500