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Part C: Note: This section is a continuation from Parts A and B of the comprehensive...

Part C:

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

Genuine Spice Inc. began operations on January 1 of the current year. The company produces 8-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 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
Actual Direct Materials
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 Labor
Rate
Actual Direct Labor
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 to fluctuations in market prices. The standard quantity of materials used per case was an ideal standard. The Mixing 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:

Enter subtracted amounts with minus sign.

Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.

10. Determine the direct materials price and quantity variances for the three materials. Enter the costs in dollars and cents (carried to three decimal places when required).

Direct Materials Price Variance:
Cream Base Natural Oils Bottles
Actual price $ $ $
Standard price
Difference $ $ $
Actual quantity (units) X ozs. X ozs. X btls.
Direct materials price variance $ $ $
Indicate if favorable or unfavorable Favorable Unfavorable Favorable

Enter the standard price to two decimal places.

Direct Materials Quantity Variance:
Cream Base Natural Oils Bottles
Actual quantity ozs. ozs. btls.
Standard quantity
Difference ozs. ozs. btls.
Standard price X X X
Direct materials quantity variance $ $ $
Indicate if favorable or unfavorable Unfavorable Unfavorable Unfavorable

11. Determine the direct labor rate and time variances for the two departments. Do not round hours. Enter the costs in dollars and cents.

Direct Labor Rate Variance:
Mixing Department Filling Department
Actual rate $ $
Standard rate
Difference $ $
Actual time (hours) X X
Direct labor rate variance $ $
Indicate if favorable or unfavorable Unfavorable Favorable
Direct Labor Time Variance:
Mixing Department Filling Department
Actual time (hours)
Standard time (hours)
Difference
Standard rate X $ X $
Direct labor time variance $ $
Indicate if favorable or unfavorable Favorable Unfavorable

12. Determine the factory overhead controllable variance.

Actual variable overhead $
Variable overhead at standard cost
Factory overhead controllable variance $
Indicate if favorable or unfavorable Unfavorable

13. Determine the factory overhead volume variance. Round rate to four decimal places and round your final answer to two decimal places.

Normal volume (cases)
Actual volume (cases)
Difference
Fixed factory overhead rate $
Factory overhead volume variance $
Indicate if favorable or unfavorable Unfavorable

Solutions

Expert Solution

10.

Direct Material Price Variance
Cream Base Natural Oils Bottles
Actual Price $          0.016 $            0.32 $            0.42
Standard Price $            0.02 $            0.30 $            0.50
Difference $        -0.004 $            0.02 $          -0.08
Actual Quantity (Units) 153000 46500 18750
Direct Material Price Variance $      -612.00 $       930.00 $   -1,500.00
Favorable Unfavorable Favorable
Cost Behaviour Units per case Standard Quantity
Cream Base Variable 100 150000
Natural Oils Variable 30 45000
Bottles Variable 12 18000
Direct Material Qunatity Variance Cream Base Natural Oils Bottles
Actual Quantity 153000 46500 18750
Standard Quantity 150000 45000 18000
Difference 3000 1500 750
Standard Price $            0.02 $            0.30 $            0.50
Direct Material Qunatity Variance $          60.00 $       450.00 $       375.00
Unfavorable Unfavorable Unfavorable

11.

Direct Labor Rate Variance
Mixing Filling
Actual Rate $          18.20 $          14.00
Standard Rate $          18.00 $          14.40
Difference $            0.20 $          -0.40
Actual Hours 487.5 140
Direct Labor Rate Variance $          97.50 $        -56.00
Unfavorable Favorable
Department Cost Behaviour Time Per case Standard Hours
Mixing Variable 20 min 500
Filling Variable 5 min 125
Direct Labor Time Variance
Mixing Filling
Actual Hours 487.5 140
Standard Hours 500 125
Difference -12.5 15
Standard Rate $          18.00 $          14.40
Direct Labor Time Variance $      -225.00 $       216.00
Favorable Unfavorable

12.

Factory Overhead controllable variance
Actual Variable Overhead $       305.00
Variable Overhead at standard Cost $       300.00
Factory Overhead controllable variance $            5.00
Unfavorable

13.

Factory Overhead Volume Variance
Normal Volume 1600
Actual Volume 1500
Difference 100
Fixed Factory Overhead Rate $     12.1625 =19460/1600
Factory Overhead Volume Variance $    1,216.25
Unfavorable

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