Question

Instructions:

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	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	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:

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

Materials Inventory:

	Cream Base	Oils	Bottles
	(ozs.)	(ozs.)	(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-Part B:
8.	Prepare the August factory overhead budget. If an amount box does not require an entry, leave it blank. (Entries of zero (0) will be cleared automatically by CNOW.)

8. Prepare the August factory overhead budget. Enter all amounts as positive numbers. 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
	Fixed	Variable	Total
Factory overhead:
Utilities
Facility lease
Equipment depreciation
Supplies
Total

Answer 1

Genuine Spice Inc.
Factory Overhead Cost Budget
For the Month Ended August 31
	Fixed	Variable	Total
Factory overhead:
Utilities	$500	$275	$775
Facility lease	14,000		14,000
Equipment depreciation	4,300		4,300
Supplies	660		660
Total	$19,460	$275	$19,735
Working
Utilities
Total Utility Cost at Highest Level of Production	$740
Less: Total Utility Cost at Lowest Level of Production	$600
	$140
Divided by Highest Level of Production - Lowest Level of Production	700
(1,200 - 500)
Variable Cost Per Case	$0.20
Variable utility cost: $0.20 × 1,375 cases = $275
Fixed costs = $500