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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-bonle 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 DIRECT MATERIALS Units Cont Behavior Con per Unit Direct Materials CasterCase per Case Creambase Variable 100 5002 $200 Natural os Variable 30 10:30 9.00 Bottle - Variable 0,50 600 $17.00 DIRECT LABOR Time Labora Direct Labor Department per Case per Hour Caut per Case Mixing 30 min $18.00 5600 Filling 14.40 1.20 12.20 FACTORY OVERHEAD Cost Behavioral C Uties Mixed $800 Facility lease Fixed 14.000 Equipment depreciation Fixed 4,300 Fixed $18500 Part A-Break-Even Analysis The management of Gemine 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 THEY ng p ending Instructions Det the land and it 1 Dette u & Dete De the b Part - Budget of the cent During propa Aust widows Few Good They whicwork or ea estructions 5 Pp the Aug production buil &pare the Apt ret ma 7. Prepare the Aupt dens la bo the near fut Par 111 to had Cost Behavior Variable Variable Thapte?? Theng To the Day 2.o pat pak Diring! i prep Ang neglighie wok that we wan proces investory in estructions rpueenedgnt. ipateel pwhers b hipare teng the four Prpure thetras, Pripe the Apted come mining selling expens artarliams Drunoduy nuysThe Jumaryd Therete tta which wa Awan a3farming VarSanda Com Drer Labar Tomegur Cane Marg t Samm Acoul coroadke on Normalme 1.000 cm The prices of the materials were delerent from standard due to ductuations in market prices. The standard quantity of materials used per case was an ideal standard. The Mix ing Dirattmere unesdsgher de labeor cuitct during The meccth das cousing, te actual labor rate to ecsored inland The rilling Departtendeluteor classification during the month, thus causing the actual labor rate to be less than standard Instructions 10. Daneorgeet the dire materials orceranassurances for the three materiala 11 Determine and interpeet the diet laber rate and time variances for the dparttsou 12. Determine and interpret the factory overhead controllable variance 13. Determine and interpret the factory overhead volume varunce. 14. Why are the standand direct labor and direct materials costs in the calculations for urth C800 ami tual .375cso prndatinuned in the badgets for purts 16 and 7 La F - 14.T9 t $18.30 14.00 1147 foud voed 0). provided m read pot varie Mag Actual das t 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 Units Cost Cost Behavior Direct Materials Cost per Case per Case per Unit Cream base Variable 100 oz. $0.02 $ 2.00 Natural oils Variable 30 oz. 0.30 9.00 Bottle (8-oz.) Variable 12 bottles 0.50 6.00 $17.00 DIRECT LABOR Labor Rate Direct Labor Department Time per Case per Hour Cost per Case Mixing 20 min. $18.00 $6.00 Filling 5 14.40 1.20 25 min. $7.20 FACTORY OVERHEAD Cost Behavior Variable Variable Cost Behavior Total Cost Mixed Utilities Facility lease $ 600 Fixed 14,000 Equipment depreciation Fixed 4,300 Supplies Fixed 660 $19,560 Part A-Break-Even Analysis 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 2. $55.60 Bottles chased, $8,070 1167 Chapter 23 Evaluating Variances from Standard Costs cost. The following information was gathered from the first six months of operation re garding this cost: Case Production Utility Total Cost January 500 $600 February 800 660 March 1,200 740 April 1,100 720 May 950 6:00 June 1,025 705 Instructions 1. Determine the fixed and variable portion of the utility cost using the high-low method 2. Determine the contribution margin per case. 3. Determine the fixed costs per month, including the utility fixed cost from part (1) 4. Determine the break-even number of cases per month. 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: Cases Cost 300 $12,000 Estimated finished goods inventory, August 1 Desired finished goods inventory, August 31 175 7,000 Materials Inventory: Cream Base (oz.) (oz.) Bottles (bottles) 250 290 600 Estimated materials inventory, August 1 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. Instructions 5. Prepare the August production budget. 6. Prepare the August direct materials purchases budget. 7. Prepare the August direct labor cost budget. Round the hours required for production to the nearest hour. 8. Prepare the August factory overhead cost budget. 9. Prepare the August budgeted income statement, including selling expenses. Part C-August 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 102 cz Cream base $0.016 per oz. Natural oils 50.32 per or 31 Oz Bottle 18-oz.) $0.42 per bottle 12.5 bottles (Continued) er 23 Evaluating Variances from Standard Costs Actual Direct Labor Time per Case 19.50 min. Mixing Filling 5.60 min. Actual variable overhead 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 Mix- ing 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. Instructions 10. Determine and interpret the direct materials price and quantity variances for the three materials. 11. Determine and interpret the direct labor rate and time variances for the two departments. Round hours to the nearest hour. 12. Determine and interpret the factory overhead controllable variance. 13. Determine and interpret the factory overhead volume variance. 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)? ne F Actual Direct Labor Rate $18.20 14.00 $305.00