Comprehensive Problem 5 Part B: Note: This section is a continuation from Part A of the comprehensive problem. Be sure you have completed Part A before attempting Part B. You may have to refer back to data presented in Part A and use answers from Part A when completing this section. 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 Direct Materials 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 Direct Labor 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 B—August Budgets During 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:   Case Cost Estimated finished goods inventory, August 1 300 $12,000 Desired finished goods inventory, August 31 175   7,000   Materials Inventory:   Cream Base (ozs.) Oils (ozs.) Bottles (bottles) Estimated materials inventory, August 1   250 290 600 Desired materials inventory, August 31 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: 5.  Prepare the August production budget. Enter all amounts as positive numbers.   Genuine Spice Inc. Production Budget For the Month Ended August 31   Cases Expected cases to be sold fill in the blank 1 Plus desired ending inventory fill in the blank 2 Total cases required fill in the blank 3 Less estimated beginning inventory fill in the blank 4 Total cases to be produced fill in the blank 5   6.  Prepare the August direct materials purchases budget. Enter the unit price to the nearest cent. Enter all amounts as positive numbers.   Genuine Spice Inc. Direct Materials Purchases Budget For the Month Ended August 31   Direct Materials     Cream Base (ozs.) Natural Oils (ozs.) Bottles (bottles) Total Units required for production fill in the blank 6     fill in the blank 7     fill in the blank 8         Plus desired ending inventory fill in the blank 9     fill in the blank 10     fill in the blank 11         Less estimated beginning inventory fill in the blank 12     fill in the blank 13     fill in the blank 14         Direct materials to be purchased fill in the blank 15     fill in the blank 16     fill in the blank 17         Unit price $fill in the blank 18     $fill in the blank 19     $fill in the blank 20         Total direct materials to be purchased $fill in the blank 21     $fill in the blank 22     $fill in the blank 23     $fill in the blank 24     7.  Prepare the August direct labor cost budget. For hours required, round to nearest whole hour. For hourly rate, enter to the nearest cent, if required.   Genuine Spice Inc. Direct Labor Cost Budget For the Month Ended August 31   Mixing Filling Total Hours required for production:       Hand and body lotion fill in the blank 25   fill in the blank 26       Hourly rate $fill in the blank 27   $fill in the blank 28       Total direct labor cost $fill in the blank 29   $fill in the blank 30   $fill in the blank 31     8.  Prepare the August factory overhead cost budget. If an amount box does not require an entry, leave it blank.   Genuine Spice Inc. Factory Overhead Cost Budget For the Month Ended August 31 Factory overhead: Fixed Variable Total Utilities $fill in the blank 32   $fill in the blank 33   $fill in the blank 34   Facility lease fill in the blank 35           Equipment depreciation fill in the blank 38           Supplies fill in the blank 41           Total factory overhead cost $fill in the blank 44             9.  Prepare the August budgeted income statement, including selling expenses. Enter all amounts as positive numbers.   Genuine Spice Inc. Budgeted Income Statement For the Month Ended August 31 Revenue from sales       Finished goods inventory, August 1       Direct Materials:         Direct materials inventory, August 1         Direct materials purchases         Less direct materials inventory, August 31         Cost of direct materials placed in production         Direct labor         Factory overhead       Cost of goods manufactured       Cost of finished goods available for sale       Less finished goods inventory, August 31       Cost of goods sold       Gross profit       Selling expenses       Income before income tax

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Comprehensive Problem 5
Part B:

Note: This section is a continuation from Part A of the comprehensive problem. Be sure you have completed Part A before attempting Part B. You may have to refer back to data presented in Part A and use answers from Part A when completing this section.

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
Direct Materials
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
Direct Labor
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 B—August Budgets

During 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:

  Case Cost
Estimated finished goods inventory, August 1 300 $12,000
Desired finished goods inventory, August 31 175   7,000

 

Materials Inventory:

  Cream Base
(ozs.)
Oils
(ozs.)
Bottles
(bottles)
Estimated materials inventory, August 1   250 290 600
Desired materials inventory, August 31 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:

5.  Prepare the August production budget. Enter all amounts as positive numbers.

 

Genuine Spice Inc.
Production Budget
For the Month Ended August 31
  Cases
Expected cases to be sold fill in the blank 1
Plus desired ending inventory fill in the blank 2
Total cases required fill in the blank 3
Less estimated beginning inventory fill in the blank 4
Total cases to be produced fill in the blank 5

 

6.  Prepare the August direct materials purchases budget. Enter the unit price to the nearest cent. Enter all amounts as positive numbers.

 

Genuine Spice Inc.
Direct Materials Purchases Budget
For the Month Ended August 31
  Direct Materials  
  Cream Base (ozs.) Natural Oils (ozs.) Bottles (bottles) Total
Units required for production fill in the blank 6     fill in the blank 7     fill in the blank 8        
Plus desired ending inventory fill in the blank 9     fill in the blank 10     fill in the blank 11        
Less estimated beginning inventory fill in the blank 12     fill in the blank 13     fill in the blank 14        
Direct materials to be purchased fill in the blank 15     fill in the blank 16     fill in the blank 17        
Unit price $fill in the blank 18     $fill in the blank 19     $fill in the blank 20        
Total direct materials to be purchased $fill in the blank 21     $fill in the blank 22     $fill in the blank 23     $fill in the blank 24  

 

7.  Prepare the August direct labor cost budget. For hours required, round to nearest whole hour. For hourly rate, enter to the nearest cent, if required.

 

Genuine Spice Inc.
Direct Labor Cost Budget
For the Month Ended August 31
  Mixing Filling Total
Hours required for production:      
Hand and body lotion fill in the blank 25   fill in the blank 26      
Hourly rate $fill in the blank 27   $fill in the blank 28      
Total direct labor cost $fill in the blank 29   $fill in the blank 30   $fill in the blank 31  

 

8.  Prepare the August factory overhead cost budget. If an amount box does not require an entry, leave it blank.

 

Genuine Spice Inc.
Factory Overhead Cost Budget
For the Month Ended August 31
Factory overhead: Fixed Variable Total
Utilities $fill in the blank 32   $fill in the blank 33   $fill in the blank 34  
Facility lease fill in the blank 35          
Equipment depreciation fill in the blank 38          
Supplies fill in the blank 41          
Total factory overhead cost $fill in the blank 44          

 

9.  Prepare the August budgeted income statement, including selling expenses. Enter all amounts as positive numbers.

 

Genuine Spice Inc.
Budgeted Income Statement
For the Month Ended August 31
Revenue from sales      
Finished goods inventory, August 1      
Direct Materials:      
  Direct materials inventory, August 1      
  Direct materials purchases      
  Less direct materials inventory, August 31      
  Cost of direct materials placed in production      
  Direct labor      
  Factory overhead      
Cost of goods manufactured      
Cost of finished goods available for sale      
Less finished goods inventory, August 31      
Cost of goods sold      
Gross profit      
Selling expenses      
Income before income tax      
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