Question

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-bottie 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 per Case 2.00 9.00 6.00 $17.00 Cost per Unit $0.02 0.30 0.50 Units per Case 100 oz. 30 az Cost Behavior Cream base Variable Natural oils Variable Bottle (8-oz.) Variable12 bottles DIRECT LABOR Department Cost Behavior Time per Case Labor Rate per Hour $18.00 14.40 Cost per Case $6.00 1.20 $7.20 Mixing Variable 20 min. MixingVariable20 min Filling Vaniable Variable 25 min. FACTORY OVERHEAD Cost Behavior Total Cost Utlities Facility lease Equipment depreciaton Fixed $600 14,000 4,300 Mixed Fxed Check My Work 2 more Check My Work uses remaining signment Score: 0.0% All work saved. Facility lease Fued 14,000 4,300 660 19,560 Equipment depreciation Fxed Part A-Break-Even Analysis The management of Genuine Spice he. wa todetermine the number of cases required to break even per mont. The utmos cost, which is part of factory overhead, is a mixed oost. The folowing information was gathered from the first six months of operation regarding this cost Case Production Uuility Total Cost 500 $600 660 740 720 690 800 March Apn 1,100 950 1,025 705 Required-Part A: 1. Determine the fxed and werisble portion of the unlty cost using ne bigh-ow method 2Determine the contricsution marin per case 3 Determine the fixed costs per month including the unlity Faend cost from part (t) 4 Determine the break-ewen number of cases per month Part B-August Budgets During Juily of the cument year, the management at Genuine Spice Inc asked the controltler to prepare August manufacturing and income statement budgets Demand was expectnd to be 1,500 cases at $100 per casse for August Inventcry planining informaton is provided as tolows Finisned Goods inventory Calculator eBook 224.a Comprehensive Assignment Finished Goods Inventory Cases Cost $12,000 Estimated finished goods inventory, August 1 300 Desired tinished goods inventory, August 31175 7,000 Materials Inventory Cream Base Oils Bottles (oz.) (oz.) (bottles) 250 Estimated materials inventory, August 1 Desired materials inventory, August 31 ,000 290 600 240 30 There was negligble work in process inventory assumed for either the beginning or end of the month; thus, none was change in the cost per unit or estimated units per case operating data from January assumed. In addition, there was no Required-Part B 5. Prepare the August production budget 6. Prepare the August direct materials purchases budget 7. Propare the August direct labor cost budgot. Round the hours required for production to the nearest hour 8. Propare the August factory overhead cost budget It an amount box does not require an entry, leave it biank. (Entries of zero (0) will be cleared automaticaly by GNOW) 9. Prepare the August budgeted income statement, including seling expenses. NOTE: Because you are not required to prepare a cost of goods sold budget, the cost of goods sold calculations will bo part of the budgeted income statement Enter al amounts as positve numbers. Part C-August Veriance Analysis During September of the current year,the controller was asked to perform variance analyses for August. The January operating data prices, rates, times, and quantisies per case. There were 1,500 actual cases produced during August, which was 250 more cases than Check My Work 2 more Check My Work uses remaining Part C-August Varlance Analysis During September of the current year, the controle 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 of the month. Actual data for August were as follows planned at the beginning Actual Direct Materials Quantity per Case 102 02. 31 oz Price per Unit Cream base $0.016 per oz. Natural oils $0.32 per oz. Botte (8-oz.) $0.42 per bottle 125 botties Actual Direct Labor Time per Case 19.50 min. 5.60 min. Actual Direct Labor Rate Mixing $18.20 Filling 14.00 Actual variable overhead $305.00 Normal volume 1,600 cases The prices of the materials were diffieront from standard due to fluctuations in market prices. The standard quantity of materials used per case was an ideal stardard. The Maxding Department used a higher grade labor classiication 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 12. Determine and interpret the factory overhead controllable varilance. 13. Dotormine and interpret the factory overhead volume variance. 14. Why are t hours to the nearest tenth of an hour he standard direct labor and direct materials costs in the caloulations for parts (10) and (11) based on the actual 1,500-case volume rather than the planned 1,375 cases of production used in the budgets for parts (6) and (7)? production v

Answer 1

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