Question

Comprehensive Problem 5
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

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		Favorable

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

14. The production volume of  cases was planned at the beginning of August. The variances compare the actual cost and the standard cost of   for the month. Thus, the standard cost must be based on the  units of actual production.

Answer 1

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

14. The production volume of 1250 cases was planned at the beginning of August. The variances compare the actual cost and the standard cost of actual production for the month. Thus the standard cost must be based on the actual units of actual production.