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 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:

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

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

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.

Required:

5. Prepare the August production budget.

Line Item Description	Cases
Desired ending inventoryEstimated beginning inventoryExpected cases to be soldTotal units availableTotal units to be produced	fill in the blank 2
Desired ending inventoryEstimated beginning inventoryExpected cases to be soldTotal units availableTotal units to be produced	fill in the blank 4
Desired ending inventoryEstimated beginning inventoryExpected cases to be soldTotal units availableTotal units to be produced	fill in the blank 6
Desired ending inventoryEstimated beginning inventoryExpected cases to be soldTotal units availableTotal units to be produced	fill in the blank 8
Desired ending inventoryEstimated beginning inventoryExpected cases to be soldTotal units availableTotal units to be produced	fill in the blank 10

6. Prepare the August direct materials purchases budget. Enter the unit price to the nearest cent.

Line Item Description	Cream Base (ozs.)	Natural Oils (ozs.)	Bottles (bottles)	Total
Direct materials to be purchasedExpected cases to be soldTotal direct materials to be purchasedUnit priceUnits required for production	fill in the blank 12	fill in the blank 13	fill in the blank 14
Desired ending inventoryDirect materials to be purchasedExpected cases to be soldTotal direct materials to be purchasedUnit price	fill in the blank 16	fill in the blank 17	fill in the blank 18
Direct materials to be purchasedEstimated beginning inventoryExpected cases to be soldTotal direct materials to be purchasedUnit price	fill in the blank 20	fill in the blank 21	fill in the blank 22
Direct materials to be purchasedEstimated beginning inventoryTotal direct materials to be purchasedUnit priceUnits required for production	fill in the blank 24	fill in the blank 25	fill in the blank 26
Direct materials to be purchasedEstimated beginning inventoryTotal direct materials to be purchasedUnit priceUnits required for production	$fill in the blank 28	$fill in the blank 29	$fill in the blank 30
Desired ending inventoryDirect materials to be purchasedTotal direct materials to be purchasedUnit priceUnits required for production	$fill in the blank 32	$fill in the blank 33	$fill in the blank 34	$fill in the blank 35

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.

Line Item Description	Mixing	Filling	Total
Hours required for production of:
Hand and body lotionHourly rateTotal direct labor costTotal direct materials to be purchasedUnit price	fill in the blank 37	fill in the blank 38
Hand and body lotionHourly rateTotal direct labor costTotal direct materials to be purchasedUnit price	$fill in the blank 40	$fill in the blank 41
Hand and body lotionHourly rateTotal direct labor costTotal direct materials to be purchasedUnit price	$fill in the blank 43	$fill in the blank 44	$fill in the blank 45

8. Prepare the August factory overhead cost budget. If an amount box does not require an entry, leave it blank.

Line Item Description	Fixed	Variable	Total
Factory overhead:
Cost of goods soldDirect laborFactory overheadHand and body lotionUtilities	$fill in the blank 47	$fill in the blank 48	$fill in the blank 49
Cost of goods soldDirect laborFacility leaseFactory overheadHand and body lotion	fill in the blank 51	fill in the blank 52	fill in the blank 53
Cost of goods soldDirect laborEquipment depreciationFactory overheadHand and body lotion	fill in the blank 55	fill in the blank 56	fill in the blank 57
Cost of goods soldDirect laborFactory overheadHand and body lotionSupplies	fill in the blank 59	fill in the blank 60	fill in the blank 61
Total	$fill in the blank 62	$fill in the blank 63	$fill in the blank 64

Prepare the August budgeted income statement, including selling expenses.

Line Item Description	Amount	Amount	Amount
Cost of direct materials for productionCost of goods soldDirect laborDirect materials inventory, August 1Finished goods inventory, August 1Finished goods inventory, August 31Gross profitOperating incomeSalesSelling expenses			$fill in the blank 66
Cost of direct materials for productionCost of goods soldDirect laborDirect materials inventory, August 1Finished goods inventory, August 1Finished goods inventory, August 31Gross profitOperating incomeSalesSelling expenses		$fill in the blank 68
Cost of direct materials for productionCost of goods soldDirect laborDirect materials inventory, August 1Finished goods inventory, August 1Finished goods inventory, August 31Gross profitOperating incomeSalesSelling expenses	$fill in the blank 70
Cost of direct materials for productionCost of goods soldDirect laborDirect materials purchasesFinished goods inventory, August 1Finished goods inventory, August 31Gross profitOperating incomeSalesSelling expenses	fill in the blank 72
Cost of direct materials for productionCost of goods soldDirect laborDirect materials inventory, August 31Finished goods inventory, August 1Finished goods inventory, August 31Gross profitOperating incomeSalesSelling expenses	fill in the blank 74
Cost of direct materials for productionCost of goods soldDirect laborDirect materials inventory, August 31Finished goods inventory, August 1Finished goods inventory, August 31Gross profitOperating incomeSalesSelling expenses	$fill in the blank 76
Cost of direct materials for productionCost of goods soldDirect laborDirect materials inventory, August 31Finished goods inventory, August 1Finished goods inventory, August 31Gross profitOperating incomeSalesSelling expenses	fill in the blank 78
Cost of direct materials for productionCost of goods soldDirect materials inventory, August 31Factory overheadFinished goods inventory, August 1Finished goods inventory, August 31Gross profitOperating incomeSalesSelling expenses	fill in the blank 80	fill in the blank 81
Cost of direct materials for productionCost of goods soldDirect materials inventory, August 31Factory overheadFinished goods inventory, August 1Finished goods inventory, August 31Gross profitOperating incomeSalesSelling expenses		fill in the blank 83
Cost of direct materials for productionCost of goods soldDirect materials inventory, August 31Factory overheadFinished goods inventory, August 1Finished goods inventory, August 31Gross profitOperating incomeSalesSelling expenses			fill in the blank 85
Cost of direct materials for productionCost of goods soldDirect materials inventory, August 31Factory overheadFinished goods inventory, August 1Finished goods inventory, August 31Gross profitOperating incomeSalesSelling expenses			$fill in the blank 87
Cost of direct materials for productionCost of goods soldDirect materials inventory, August 31Factory overheadFinished goods inventory, August 1Finished goods inventory, August 31Gross profitOperating incomeSalesSelling expenses			fill in the blank 89
Cost of direct materials for productionCost of goods soldDirect materials inventory, August 31Factory overheadFinished goods inventory, August 1Finished goods inventory, August 31Gross profitOperating incomeSalesSelling expenses			$fill in the blank 91