Text version: First Image)

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
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
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
Equipment depreciation	Fixed	4,300
Supplies	Fixed	660
		$19,560

Second Image)

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	Quantity per Case
Cream base	$0.016 per oz.	102 oz.
Natural oils	$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.
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 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)?

Third Image)

10. Determine and interpret the direct materials price and quantity variances for the three materials. 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 (Market prices? / quantity used? / standard prices?) caused the direct material price variances. All the quantity variances were (Favorable? / Unfavorable?) indicating (Some Material Losses and Rejections? / Above Average Quality Materials?) .

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 S20 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 Cream base Variable 100 oz. S0.02 $ 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 Department Cost Behavior Time per Case Labor Rate per Hour Cost per Case Mixing Variable 20 min. $18.00 $6.00 Filling Variable 14.40 1.20 25 min. $7.20 FACTORY OVERHEAD Cost Behavior Total Cost Utilities Mixed $800 Facility lease Fixed 14,000 Equipment depreciation Fixed 4.300 Supplies Fixed ] $19,580 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 Quantity per Case 102 oz Cream base Natural oils Bottle (8-oz.) $0.016 per oz. 90.32 per oz. S0.42 per bottle 31 oz. 12.5 bottles Actual Direct Labor Rate $18.20 14.00 Actual Direct Labor Time per Case 19.50 min. 5.60 min. Miacing Filling Actual variable overhead Normal volume $305.00 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 Missing 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. 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 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)? 10. Determine and interpret the direct materials price and quantity variances for the three materials. 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 Direct materials price variance Direct Materials Quantity Variance Cream Base Natural Oils Bottles Difference Direct materials quantity variance The fluctuation in caused the direct material price variances. All the quantity variances were indicating