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

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

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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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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