Genuine Spice Inc. began operations on January 1, 2016. Thecompany produces eight-ounce bottles of hand and body lotion calledEternal Beauty. The lotion is sold wholesale in 12-bottle cases for$100 per case. There is a selling commission of $20 per case. TheJanuary direct materials, direct labor, and factory overhead costsare as follows:
DIRECT MATERIALS
Cost Behavior
Units per Case
Cost per Unit
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
$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
Part AâBreak-Even Analysis
The management of Genuine Spice Inc. wishes to determine thenumber of cases required to break even per month. The utilitiescost, which is part of factory overhead, is a mixed cost. Thefollowing information was gathered from the first six months ofoperation regarding this cost:
2016
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
Required
1. Determine the fixed and variable portion of the utilitycost using the high-low method.
At high point At low point Variable cost $ $ Total fixed Cost $500 $ Total Cost $740 $600
2- Prepare the August factory overhead budget
Genuine Spice Inc. Factory OverheadBudget For the Month EndedAugust 31, 2016
Fixed Variable Total
Factory overhead: Utilities $500 $ $ Facility lease 14000 14000 Equipment depreciation 4300 4300 Supplies 660 660 Total $19460 $
3- Prepare the August budgeted income statement, includingselling expenses. Enter all amounts as positive numbers. NOTE:Because you are not required to prepare a cost of goods soldbudget, the cost of goods sold calculations will be part of thebudgeted income statement.
Genuine Spice Inc. Budgeted IncomeStatement For the Month Ended August 31, 2016
Sales $ Finished goods inventory, August 1 $ Direct materials inventory, August 1 $ Direct materials purchases Less direct materials inventory, August 31 Cost of direct materials for production $ Direct labor Factory overhead Less finished goods inventory, August 31 Cost of goods sold Gross profit Selling expenses $ Income before income tax $
Genuine Spice Inc. began operations on January 1, 2016. Thecompany produces eight-ounce bottles of hand and body lotion calledEternal Beauty. The lotion is sold wholesale in 12-bottle cases for$100 per case. There is a selling commission of $20 per case. TheJanuary direct materials, direct labor, and factory overhead costsare as follows:
DIRECT MATERIALS | ||||
Cost Behavior | Units per Case | Cost per Unit | 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 |
$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 | ||
Part AâBreak-Even Analysis
The management of Genuine Spice Inc. wishes to determine thenumber of cases required to break even per month. The utilitiescost, which is part of factory overhead, is a mixed cost. Thefollowing information was gathered from the first six months ofoperation regarding this cost:
2016 | 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 |
Required
1. Determine the fixed and variable portion of the utilitycost using the high-low method.
| At high point | At low point | |
| Variable cost | $ | $ |
| Total fixed Cost | $500 | $ |
| Total Cost | $740 | $600 |
2- Prepare the August factory overhead budget
| Genuine Spice Inc. | |||
| Factory OverheadBudget | |||
| For the Month EndedAugust 31, 2016 | |||
| Fixed | Variable | Total | |
| Factory overhead: | |||
| Utilities | $500 | $ | $ |
| Facility lease | 14000 | 14000 | |
| Equipment depreciation | 4300 | 4300 | |
| Supplies | 660 | 660 | |
| Total | $19460 | $ |
3- Prepare the August budgeted income statement, includingselling expenses. Enter all amounts as positive numbers. NOTE:Because you are not required to prepare a cost of goods soldbudget, the cost of goods sold calculations will be part of thebudgeted income statement.
| Genuine Spice Inc. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Budgeted IncomeStatement | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| For the Month Ended August 31, 2016
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Related questions
Genuine Spice Inc. began operations on January 1, 2016. Thecompany produces eight-ounce bottles of hand and body lotion calledEternal Beauty. The lotion is sold wholesale in 12-bottle cases for$100 per case. There is a selling commission of $20 per case. TheJanuary direct materials, direct labor, and factory overhead costsare as follows:
DIRECT MATERIALS | ||||
Cost Behavior | Units per Case | Cost per Unit | 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 |
$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 | ||
During September of the current year, the controller was askedto perform variance analyses for August. The January operating dataprovided the standard prices, rates, times, and quantities percase. There were 1,500 actual cases produced during August, whichwas 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 ozs. | |
Natural oils | $0.32 per oz. | 31 ozs. | |
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 than standard due tofluctuations in market prices. The standard quantity of materialsused per case was an ideal standard. The Mixing Department used ahigher grade labor classification during the month, thus causingthe actual labor rate to exceed standard. The Filling Departmentused a lower grade labor classification during the month, thuscausing the actual labor rate to be less than standard.
| 1. Determine and interpret the direct materials price andquantity variances for the three materials.
2. Determine the direct labor rate and time variances forthe two departments. Round hours to the nearest tenth of anhour.
3. Determine and interpret the factory overhead controllablevariance.
4. Determine and interpret the factory overhead volumevariance. Round rate to four decimal places.
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Genuine Spice Inc. began operations on January 1, 2016. Thecompany produces eight-ounce bottles of hand and body lotion calledEternal Beauty. The lotion is sold wholesale in 12-bottle cases for$100 per case. There is a selling commission of $20 per case. TheJanuary direct materials, direct labor, and factory overhead costsare as follows:
| DIRECT MATERIALS | ||||
| Cost Behavior | Units per Case | Cost per Unit | 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 |
| $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 | ||
Part AâBreak-Even Analysis
The management of Genuine Spice Inc. wishes to determine thenumber of cases required to break even per month. The utilitiescost, which is part of factory overhead, is a mixed cost. Thefollowing information was gathered from the first six months ofoperation regarding this cost:
| 2016 | CaseProduction | Utility Total Cost |
|---|---|---|
| January | 500 | $600 |
| February | 800 | 660 |
| March | 1,200 | 740 |
| April | 1,100 | 720 |
| May | 950 | 690 |
| June | 1,025 | 705 |
| Required-Part A: | |
| 1. | Determine the fixed andvariable portion of the utility cost using the high-lowmethod. |
| 2. | Determine the contributionmargin per case. |
| 3. | Determine the fixed costs permonth, including the utility fixed cost from part (1). |
| 4. | Determine the break-even numberof cases per month. |
Part BâAugust Budgets
During July of the current year, the management of Genuine SpiceInc. asked the controller to prepare August manufacturing andincome statement budgets. Demand was expected to be 1,500 cases at$100 per case for August. Inventory planning information isprovided as follows:
Finished Goods Inventory:
| Cases | Cost | |
|---|---|---|
| Estimated finished goods inventory,August 1, 2016 | 300 | $12,000 |
| Desired finished goods inventory,August 31, 2016 | 175 | 7,000 |
Materials Inventory:
| CreamBase | Oils | Bottles | |
|---|---|---|---|
| (ozs.) | (ozs.) | (bottles) | |
| Estimated materials inventory,August 1, 2016 | 250 | 290 | 600 |
| Desired materials inventory, August31, 2016 | 1,000 | 360 | 240 |
There was negligible work in process inventory assumed foreither the beginning or end of the month; thus, none was assumed.In addition, there was no change in the cost per unit or estimatedunits per case operating data from January.
| Required-Part B: | |||
| 5. | Prepare the August productionbudget.* | ||
| 6. | Prepare the August directmaterials purchases budget.* | ||
| 7. | Prepare the August direct laborbudget. Round the hours required for production to the nearesthour.* | ||
| 8. | Prepare the August factoryoverhead budget. If an amount box does not require an entry, leaveit blank. (Entries of zero (0) will be cleared automatically byCNOW.)* | ||
| 9. | Prepare the August budgetedincome statement, including selling expenses. NOTE: Because you arenot required to prepare a cost of goods sold budget, the cost ofgoods sold calculations will be part of the budgeted incomestatement. *
|
Part CâAugust Variance Analysis
During September of the current year, the controller was askedto perform variance analyses for August. The January operating dataprovided the standard prices, rates, times, and quantities percase. There were 1,500 actual cases produced during August, whichwas 250 more cases than planned at the beginning of the month.Actual data for August were as follows:
Actual Direct Materials | ||
|---|---|---|
| Priceper Unit | Quantity per Case | |
| Cream base | $0.016per oz. | 102ozs. |
| Natural oils | $0.32per oz. | 31ozs. |
| Bottle (8-oz.) | $0.42per bottle | 12.5bottles |
| Actual Direct | Actual Direct Labor | |
|---|---|---|
| LaborRate | Timeper Case | |
| Mixing | $18.20 | 19.50min. |
| Filling | 14.00 | 5.60min. |
| Actual variable overhead | $305.00 |
| Normal volume | 1,600cases |
The prices of the materials were different than standard due tofluctuations in market prices. The standard quantity of materialsused per case was an ideal standard. The Mixing Department used ahigher grade labor classification during the month, thus causingthe actual labor rate to exceed standard. The Filling Departmentused a lower grade labor classification during the month, thuscausing the actual labor rate to be less than standard.
| Required-Part C: | |
| 10. | Determine and interpret thedirect materials price and quantity variances for the threematerials. |
| 11. | Determine and interpret thedirect labor rate and time variances for the two departments. Roundhours to the nearest hour. |
| 12. | Determine and interpret thefactory overhead controllable variance. |
| 13. | Determine and interpret thefactory overhead volume variance. |
I KNOW THIS IS A LONG QUESTION BUT CAN SOMEONE PLEASE!! ANSWERTHE FULL QUESTION it is not due immediately
Genuine Spice Inc. began operations on January 1, 2016. Thecompany produces eight-ounce bottles of hand and body lotion calledEternal Beauty. The lotion is sold wholesale in 12-bottle cases for$100 per case. There is a selling commission of $20 per case. TheJanuary direct materials, direct labor, and factory overhead costsare as follows:
| DIRECT MATERIALS | ||||
| CostBehavior | Units perCase | Cost perUnit | Cost perCase | |
| 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 |
| $17.00 | ||||
| DIRECT LABOR | ||||
| Department | CostBehavior | Time perCase | Labor Rateper Hour | Cost perCase |
| Mixing | Variable | 20 min | $18.00 | $6.00 |
| Filling | Variable | 5 | 14.40 | 1.20 |
| 25 min. | $7.20 | |||
| FACTORYOVERHEAD | ||
| CostBehavior | Total Cost | |
| Utilities | Mixed | $600 |
| Facility lease | Fixed | 14,000 |
| Equipment depreciation | Fixed | 4,300 |
| Supplies | Fixed | 660 |
| $19,560 | ||
Part AâBreak-Even Analysis
The management of Genuine Spice Inc. wishes to determine thenumber of cases required to break even per month. The utilitiescost, which is part of factory overhead, is a mixed cost. Thefollowing information was gathered from the first six months ofoperation regarding this cost:
| 2016 | CaseProduction | Utility Total Cost |
|---|---|---|
| January | 500 | $600 |
| February | 800 | 660 |
| March | 1,200 | 740 |
| April | 1,100 | 720 |
| May | 950 | 690 |
| June | 1,025 | 705 |
| Required-Part A: | |
| 1. | Determine the fixed andvariable portion of the utility cost using the high-lowmethod. |
| 2. | Determine the contributionmargin per case. |
| 3. | Determine the fixed costs permonth, including the utility fixed cost from part (1). |
| 4. | Determine the break-even numberof cases per month. |
Part BâAugust Budgets
During July of the current year, the management of Genuine SpiceInc. asked the controller to prepare August manufacturing andincome statement budgets. Demand was expected to be 1,500 cases at$100 per case for August. Inventory planning information isprovided as follows:
Finished Goods Inventory:
| Cases | Cost | |
|---|---|---|
| Estimated finished goods inventory,August 1, 2016 | 300 | $12,000 |
| Desired finished goods inventory,August 31, 2016 | 175 | 7,000 |
Materials Inventory:
| CreamBase | Oils | Bottles | |
|---|---|---|---|
| (ozs.) | (ozs.) | (bottles) | |
| Estimated materials inventory,August 1, 2016 | 250 | 290 | 600 |
| Desired materials inventory, August31, 2016 | 1,000 | 360 | 240 |
There was negligible work in process inventory assumed foreither the beginning or end of the month; thus, none was assumed.In addition, there was no change in the cost per unit or estimatedunits per case operating data from January.
| Required-Part B: | |||
| 5. | Prepare the August productionbudget.* | ||
| 6. | Prepare the August directmaterials purchases budget.* | ||
| 7. | Prepare the August direct laborbudget. Round the hours required for production to the nearesthour.* | ||
| 8. | Prepare the August factoryoverhead budget. If an amount box does not require an entry, leaveit blank. (Entries of zero (0) will be cleared automatically byCNOW.)* | ||
| 9. | Prepare the August budgetedincome statement, including selling expenses. NOTE: Because you arenot required to prepare a cost of goods sold budget, the cost ofgoods sold calculations will be part of the budgeted incomestatement. *
|
Part CâAugust Variance Analysis
During September of the current year, the controller was askedto perform variance analyses for August. The January operating dataprovided the standard prices, rates, times, and quantities percase. There were 1,500 actual cases produced during August, whichwas 250 more cases than planned at the beginning of the month.Actual data for August were as follows:
Actual Direct Materials | ||
|---|---|---|
| Priceper Unit | Quantity per Case | |
| Cream base | $0.016per oz. | 102ozs. |
| Natural oils | $0.32per oz. | 31ozs. |
| Bottle (8-oz.) | $0.42per bottle | 12.5bottles |
| Actual Direct | Actual Direct Labor | |
|---|---|---|
| LaborRate | Timeper Case | |
| Mixing | $18.20 | 19.50min. |
| Filling | 14.00 | 5.60min. |
| Actual variable overhead | $305.00 |
| Normal volume | 1,600cases |
The prices of the materials were different than standard due tofluctuations in market prices. The standard quantity of materialsused per case was an ideal standard. The Mixing Department used ahigher grade labor classification during the month, thus causingthe actual labor rate to exceed standard. The Filling Departmentused a lower grade labor classification during the month, thuscausing the actual labor rate to be less than standard.
| Required-Part C: | |
| 10. | Determine and interpret thedirect materials price and quantity variances for the threematerials. |
| 11. | Determine and interpret thedirect labor rate and time variances for the two departments. Roundhours to the nearest hour. |
| 12. | Determine and interpret thefactory overhead controllable variance. |
| 13. | Determine and interpret thefactory overhead volume variance. |
Questions (Part A)
1. Determine the fixed and variable portion of the utility costusing the high-low method.
| AtHigh Point | AtLow Point | |
|---|---|---|
| Variable cost per unit | ||
| Total fixed cost | ||
| Total cost |
2. Determine the contribution margin per case.
3. Determine the fixed costs per month, including the utilityfixed cost from part (1).
1 | Total fixed costs: | |
2 | ||
3 | ||
4 | ||
5 | ||
6 |
4. Determine the break-even number of cases per month.cases
Production Budget
5. Prepare the August production budget. Enter all amounts aspositive numbers.
| Genuine Spice Inc. | |
| Production Budget | |
| For the Month Ended August 31, 2016 | |
| Cases | |
| Plus | |
| Total | |
| Less | |
Direct Materials Purchases Budget
6. Prepare the August direct materials purchases budget. Enterall amounts as positive numbers.
| Genuine Spice Inc. | ||||
| Direct Materials Purchases Budget | ||||
| For the Month Ended August 31, 2016 | ||||
| Cream Base (ozs.) | Natural Oils (ozs.) | Bottles (bottles) | Total | |
| Plus | ||||
| Less | ||||
| Total | ||||
| X | ||||
Direct Labor Budget
7. Prepare the August direct labor budget. Round the hoursrequired for production to the nearest hour. Enter all amounts aspositive numbers.
| Genuine Spice Inc. | |||
| Direct Labor Budget | |||
| For the Month Ended August 31, 2016 | |||
| Mixing | Filling | Total | |
| X | |||
Factory Overhead Budget
8. Prepare the August factory overhead budget. Enter all amountsas positive numbers. If an amount box does not require an entry,leave it blank. (Entries of zero (0) will be cleared automaticallyby CNOW.)
| Genuine Spice Inc. | |||
| Factory Overhead Budget | |||
| For the Month Ended August 31, 2016 | |||
| Fixed | Variable | Total | |
| Factory overhead: | |||
| Utilities | |||
| Facility lease | |||
| Equipment depreciation | |||
| Supplies | |||
| Total | |||
Budgeted Income Statement
9. Prepare the August budgeted income statement, includingselling expenses. Enter all amounts as positive numbers. NOTE:Because you are not required to prepare a cost of goods soldbudget, the cost of goods sold calculations will be part of thebudgeted income statement.
| Genuine Spice Inc. | |||
| Budgeted Income Statement | |||
| For the Month Ended August 31, 2016 | |||
| Sales | |||
| Finished goods inventory,August 1 | |||
| Direct materials inventory,August 1 | |||
| Direct materialspurchases | |||
| Less direct materialsinventory, August 31 | |||
| Cost of direct materials forproduction | |||
| Direct labor | |||
| Factory overhead | |||
| Less finished goods inventory,August 31 | |||
| Cost of goods sold | |||
| Gross profit | |||
| Selling expenses | |||
| Income before income tax | |||
Variance Analysis (Part C)
10. Determine and interpret the direct materials price andquantity variances for the three materials.
| Direct Materials Price Variance | ||||||
| CreamBase | NaturalOils | Bottles | ||||
| Difference | ||||||
| X | ||||||
| Direct materials pricevariance | ||||||
| Direct Materials Quantity Variance | ||||||
| CreamBase | NaturalOils | Bottles | ||||
| Difference | ||||||
| X | ||||||
| Direct materials quantityvariance | ||||||
The fluctuation in caused the direct material price variances.All the quantity variances were indicating .
11. Determine and interpret the direct labor rate and timevariances for the two departments. Round hours to the nearest tenthof an hour.
| Direct Labor Rate Variance | ||||
| MixingDepartment | FillingDepartment | |||
| Difference | ||||
| X | ||||
| Direct labor ratevariance | ||||
| Direct Labor Time Variance | ||||
| MixingDepartment | FillingDepartment | |||
| Difference | ||||
| X | ||||
| Direct labor timevariance | ||||
The change in the caused the labor rate variances. This changehave been responsible for the direct labor time variance.
12. Determine and interpret the factory overhead controllablevariance.
| Factory Overhead Controllable Variance | ||
| Factory overhead controllablevariance | ||
The factory overhead controllable variance was caused by thevariance in .
13. Determine and interpret the factory overhead volumevariance. Round rate to four decimal places.
| Factory Overhead Volume Variance | ||
| Normal volume (cases) | ||
| Actual volume (cases) | ||
| Difference | ||
| X | ||
| Factory overhead volumevariance | ||
The volume variance indicates the cost of .
