Stuck with number 10-14. 1-9 has supporting information for 10-14. Blank tables for 10-14 at the end.

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	Cost per Case
Creambase	Variable	100 oz.	$0.02	$ 2.00
Naturaloils	Variable	30 oz.	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
Equipmentdepreciation	Fixed	4,300
Supplies	Fixed	660
		$19,560

Part ABreak-Even AnalysisThe 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

1.	Determine the fixedand variableportion of the utility cost using the high-lowmethod. Do not round your intermediate calculations and round variablecostperunit answers to two decimal places.
2.	Determine the contribution marginper case. Do not round your intermediate calculations and round your final answer to two decimal places.
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 BAugust BudgetsDuring 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
Estimatedfinishedgoodsinventory,August1	300	$12,000
Desired finished goods inventory, August 31	175	7,000

Materials Inventory:

	Cream Base	Oils	Bottles
(oz.)	(oz.)	(bottles)
Estimatedmaterialsinventory,August1	250	290	600
Desiredmaterialsinventory,August31	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.*

6.

Prepare the August direct materials purchases budget. Round unit price answers to two decimal places.*

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. If an amount box does not require an entry, leave it blank. (Entries of zero (0) will be cleared automatically by CNOW.)*

9.

Prepare the August budgeted income statement, including selling expenses. NOTE: Because you are not required to prepare a cost of goods sold budget, the cost of goods sold calculations will be part of the budgeted income statement.*

*Enter all amounts as positive numbers.

Part CAugust Variance AnalysisDuring 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	Quantity per Case
Creambase	$0.016 per oz.	102 oz.
Naturaloils	$0.32 per oz.	31 oz.
Bottle(8-oz.)	$0.42 per bottle	12.5 bottles

	Actual Direct	Actual Direct Labor
Labor Rate	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-Part C:
10.	Determine and interpret the direct materials price and quantity variances for the three materials. Round your answers to three decimal places.Enter a favorable variance as a negative amount, and an unfavorable variance as a positive amount.
11.	Determine and interpret the direct labor rate and time variances for the two departments. Round hours to the nearest tenth of an 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 computations 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)?

Supporting info from previous problems:

1. Variable Cost per Unit is $.20

Fixed Cost is $500

2.

	Case per Prod	Sales	Variable Cost	Contribution Margin
Jan	500	$50,000	$12,200	$37,800
Feb	800	80,000	19,520	60,480
March	1,200	120,000	29,280	90,720
April	1,100	110,000	26,840	83,160
May	950	95,000	23,180	71,820
June	1,025	102,500	25,010	77,490

3. Fixed Cost

Utilities	$500
Facility Lease	14,000
Equipment Depreciation	4,300
Supplie	660
Total	19,460

4. Break-even = 350 cases

5. Genuine Spice Inc.

Production Budget

For the Month Ended August 31

	Cases
Expected Cases to be sold	1,500
Plus: Desired Ending Inventory	175
Total Unit Available	1,675
Less: Estimated Beginning Inventory	-300
Total Units to be Produced	1,375

6. Genuine Spice Inc.

Direct Materials Purchase Budget

For the Month Ended August 31

	Cream Base (oz.)	Natural Oils	Bottles	Total
Units required for Production	137,500	41,250	16,500
Plus: Desired Ending Inventory	1,000	360	600
Total Units Required	138,500	40,890	15,900
Less: Estimated Beginning Inventory	250	290	600
Total materials to be purchases	138,250	41,320	16,140
X unit price	.02	.03	.50
Total Direct Materials to be purchased	2,675	12,396	8,070	23,231

7. Genuine Spice Inc.

Direct Labor Cost Budget

For the month ended August 31

	Mixing	Filling	Total
Hours required for production	458	115
Hourly Rate	$18	$14.4
Total Direct Labor Cost	$8,244	$1,656	$9,900

8.

Genuine Spice Inc.

Factory Overhead Cost Budget

For the month ended August 31

	Fixed	Variable	Total
Factory Overhead
Utilities	$500	$275	$775
Facility Lease	14,000	0	14,000
Equipment	4,300	0	4,300
Supplies	660	0	660
Total	19,460	275	19,735

9. Genuine Spice Inc.

Budgeted Income Statement

For the month ended August 31

Revenue from Sales	150,000
Finished goods inventory, August 1	1,200
Direct Materials	151,200
Direct material, August 1	392
Direct materials Purchases	23,231
Cost of Direct materials available for use	23,623
Less: Direct Materials, August 31	248
Cost of Direct materials placed in production	23,375
Direct labor	9,900
Factory overhead	19,735
Cost of goods manufactured	53,010
Cost of finished goods available for sale	53,010
Less: Finished goods inventory, August 31	7,000
Cost f goods sold	58,010
Gross Profit	91,990
Selling Expenses	30,000
Income before income tax	61,990

10. Determine and interpret the direct materials price and quantity variances for the three materials. Round your answers to three decimal places.Enter a favorable variance as a negative amount, and an unfavorable variance as a positive amount.

Direct Materials Price Variance
	Cream Base		Natural Oils		Bottles
Difference
X
Direct materials price variance

Direct Materials Quantity Variance
	Cream Base		Natural Oils		Bottles
Difference
X
Direct materials quantity variance

The fluctuation in ______ caused the direct material price variances. All the quantity variances were (could/could not) indicating ______ .

11. Determine and interpret the direct labor rate and time variances for the two departments. Round hours to the nearest tenth of an hour.Enter a favorable variance as a negative amount, and an unfavorable variance as a positive amount.

Direct Labor Rate Variance
	Mixing Department		Filling Department
Difference
X
Direct labor rate variance

Direct Labor Time Variance
	Mixing Department		Filling Department
Difference
X
Direct labor time variance

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 a favorable variance as a negative amount, and an unfavorable variance as a positive amount.

Factory Overhead Controllable Variance
Factory overhead controllable variance

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

13. Determine and interpret the factory overhead volume variance. Round rate to four decimal places.Enter a favorable variance as a negative amount, and an unfavorable variance as a positive amount.

Factory Overhead Volume Variance
Normal volume (cases)
Actual volume (cases)
Difference
X
Factory overhead volume variance

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)?