Variance Analysis

Instructions 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 per Case 100 oz. 30 oz 12 bottles Cost per Unit S0.02 0.30 0.50 Cost per Case 2.00 9.00 6.00 $17.00 Cost Behavior Cream base Variable Natural oils Variable Bottle (8-oz.) Variable 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 Cream base $0.016 per oz Natural oils$0.32 per oz Bottle (8-oz.) $0.42 per bottle 12.5 bottles Quantity per Case 102 oz. 31 oz Actual Direct Labor Time per Case 19 50 min. .60 min Actual Direct Labor Rate Mixing $18.20 Filling14.00 Instructions 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 Mbing 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 vanances 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 matenials costs in the calculations for parts (10) and () 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)