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 BAugust 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 units required	fill in the blank 3
Less estimated beginning inventory	fill in the blank 4
Total units 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
Total units required	fill in the blank 12			fill in the blank 13			fill in the blank 14
Less estimated beginning inventory	fill in the blank 15			fill in the blank 16			fill in the blank 17
Total materials to be purchased	fill in the blank 18			fill in the blank 19			fill in the blank 20
Unit price	$fill in the blank 21			$fill in the blank 22			$fill in the blank 23
Total direct materials to be purchased	$fill in the blank 24			$fill in the blank 25			$fill in the blank 26			$fill in the blank 27

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 28		fill in the blank 29
Hourly rate	$fill in the blank 30		$fill in the blank 31
Total direct labor cost	$fill in the blank 32		$fill in the blank 33		$fill in the blank 34

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 35		$fill in the blank 36		$fill in the blank 37
Facility lease	fill in the blank 38		fill in the blank 39		fill in the blank 40
Equipment depreciation	fill in the blank 41		fill in the blank 42		fill in the blank 43
Supplies	fill in the blank 44		fill in the blank 45		fill in the blank 46
Total factory overhead cost	$fill in the blank 47		$fill in the blank 48		$fill in the blank 49

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
Sales				$fill in the blank 50
Finished goods inventory, August 1			$fill in the blank 51
Direct Materials:
	Direct materials inventory, August 1	$fill in the blank 52
	Direct materials purchases	fill in the blank 53
	Cost of direct materials available for use	$fill in the blank 54
	Less direct materials inventory, August 31	fill in the blank 55
	Cost of direct materials placed in production	$fill in the blank 56
	Direct labor	fill in the blank 57
	Factory overhead	fill in the blank 58
Cost of goods manufactured			fill in the blank 59
Cost of finished goods available for sale			$fill in the blank 60
Less finished goods inventory, August 31			fill in the blank 61
Cost of goods sold				fill in the blank 62
Gross profit				$fill in the blank 63
Selling expenses				fill in the blank 64
Income before income tax				$fill in the blank 65