Note: You must complete part A before completing parts B and C. 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 CostBehavior Unitsper Case Costper Unit Direct MaterialsCost 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 CostBehavior Timeper Case Labor Rateper Hour Direct LaborCost 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 A—Break-Even Analysis The management of Genuine Spice Inc. wants to determine the number of cases required to break even per month. The utilities cost, which is part of factory overhead, is a mixed cost. The following information was gathered from the first six months of operation regarding this cost: 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 utility cost using the high-low method. Round the per unit cost to the nearest cent. At High Point At Low Point Variable cost per unit $ $ Total fixed cost $ $ Total cost $ $ 2. Determine the contribution margin per case. Enter your answer to the nearest cent. Contribution margin per case $ 3. Determine the fixed costs per month, including the utility fixed cost from part (1). Utilities cost (from part 1) $ Facility lease Equipment depreciation Supplies Total fixed costs $ 4. Determine the break-even number of cases per month. cases 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 CostBehavior Unitsper Case Costper Unit Direct MaterialsCost 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 CostBehavior Timeper Case Labor Rateper Hour Direct LaborCost 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 BudgetFor the Month Ended August 31 Cases Expected cases to be sold Plus desired ending inventory Total cases required Less estimated beginning inventory Total cases to be produced 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 BudgetFor the Month Ended August 31 Direct Materials Cream Base (ozs.) Natural Oils (ozs.) Bottles (bottles) Total Units required for production Plus desired ending inventory Less estimated beginning inventory Direct materials to be purchased Unit price $ $ $ Total direct materials to be purchased $ $ $ $ Genuine Spice Inc.Direct Labor Cost BudgetFor the Month Ended August 31 Mixing Filling Total Hours required for production: Hand and body lotion Hourly rate $ $ Total direct labor cost $ $ $
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
Note: You must complete part A before completing parts B and C.
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
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Part A—Break-Even Analysis
The management of Genuine Spice Inc. wants to determine the number of cases required to break even per month. The utilities cost, which is part of factory overhead, is a mixed cost. The following information was gathered from the first six months of operation regarding this cost:
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 utility cost using the high-low method. Round the per unit cost to the nearest cent.
At High Point | At Low Point | |
Variable cost per unit | $ | $ |
Total fixed cost | $ | $ |
Total cost | $ | $ |
2. Determine the contribution margin per case. Enter your answer to the nearest cent.
Contribution margin per case $
3. Determine the fixed costs per month, including the utility fixed cost from part (1).
Utilities cost (from part 1) | $ |
Facility lease | |
Equipment depreciation | |
Supplies | |
Total fixed costs | $ |
4. Determine the break-even number of cases per month.
cases
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:
|
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 | |
Plus desired ending inventory | |
Total cases required | |
Less estimated beginning inventory | |
Total cases to be produced |
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 | |||||||||||
Plus desired ending inventory | |||||||||||
Less estimated beginning inventory | |||||||||||
Direct materials to be purchased | |||||||||||
Unit price | $ | $ | $ | ||||||||
Total direct materials to be purchased | $ | $ | $ | $ |
Genuine Spice Inc. Direct Labor Cost Budget For the Month Ended August 31 |
||||||
---|---|---|---|---|---|---|
Mixing | Filling | Total | ||||
Hours required for production: | ||||||
Hand and body lotion | ||||||
Hourly rate | $ | $ | ||||
Total direct labor cost | $ | $ | $ |
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