Comprehensive Problem 5 Part A: Note: You must complete part A before completing
ID: 2505047 • Letter: C
Question
Comprehensive Problem 5
Part A:
Note: You must complete part A before completing parts B and C.
Part ABreak-Even Analysis
Required:
1. Determine the fixed and variable portion of the utility cost, using the high-low method. Round the per unit cost to the nearest cent.
2. Determine the contribution margin per case. Enter your answer to the nearest cent.
Contribution margin per case $
3. Determine the fixed costs per month, including the utility fixed cost from part (1).
4. Determine the break-even number of cases per month.
cases
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.
Part BAugust Budgets
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.
6. Prepare the August direct materials purchases budget. Enter the unit price to the nearest cent. Enter all amounts as positive numbers.
7. Prepare the August direct labor budget. For hours required, round to nearest whole hour. For hourly rate, enter to the nearest cent, if required.
8. Prepare the August factory overhead budget. If an amount box does not require an entry, leave it blank.
9. Prepare the August budgeted income statement, including selling expenses. Enter all amounts as positive numbers.
$
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.
Part CAugust Variance Analysis
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:
10. Determine and interpret 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). Enter all amounts as positive numbers.
Enter the standard price to two decimal places.
11. Determine and interpret the direct labor rate and time variances for the two departments. Round hours to the nearest hour. Enter the costs in dollars and cents. Enter all amounts as positive numbers.
12. Determine and interpret the factory overhead controllable variance. Enter all amounts as positive numbers.
13. Determine and interpret the factory overhead volume variance. When determining the fixed factory overhead rate, round your answer to two decimal places (and use that rounded rate when calculating factory overhead volume variance). Enter all amounts as positive numbers.
Comprehensive Problem 5
Part A:
Note: You must complete part A before completing parts B and C.
Genuine Spice Inc. began operations on January 1, 2014. The company produces a hand and body lotion in an eight-ounce bottle 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:
Part ABreak-Even Analysis
The management of Genuine Spice Inc. wishes to determine the number of cases required to break even per month. The utilities cost, which is part of factory overhead, is a mixed cost. The following information was gathered from the first six months of operation regarding this cost:
Required:
1. Determine the fixed and variable portion of the utility cost, using the high-low method. Round the per unit cost to the nearest cent.
At High Point At Low Point Variable cost per unit $ $ Total fixed cost $ $ Total cost $ $2. Determine the contribution margin per case. Enter your answer to the nearest cent.
Contribution margin per case $
3. Determine the fixed costs per month, including the utility fixed cost from part (1).
Utilities cost (from part 1) $ Facility lease $ Equipment depreciation $ Supplies $ Total fixed costs $4. Determine the break-even number of cases per month.
cases
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, 2014. The company produces a hand and body lotion in an eight-ounce bottle 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:
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:
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, 2014 Cases Expected cases to be sold Plus desired ending inventory Total Less estimated beginning inventory Total units to be produced
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, 2014 Cream Base (ozs.) Natural Oils (ozs.) Bottles (bottles) Total Units required for production Plus desired ending inventory Less estimated beginning inventory Direct materials to be purchased Unit price $ $ $ Total direct materials to be purchased $ $ $ $
7. Prepare the August direct labor budget. For hours required, round to nearest whole hour. For hourly rate, enter to the nearest cent, if required.
Genuine Spice Inc.Direct Labor Budget
For the Month Ended August 31, 2014 Hours required for production of: Mixing Filling Total Hand and body lotion Hourly rate $ $ Total direct labor cost $ $ $
8. Prepare the August factory overhead budget. If an amount box does not require an entry, leave it blank.
Genuine Spice Inc.Factory Overhead Budget
For the Month Ended August 31, 2014 Factory overhead: Fixed Variable Total Utilities $ $ $ Facility lease Equipment depreciation Supplies Total $ $ $
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, 2014 Sales $ Finished goods inventory, August 1 $ Direct materials inventory, August 1 $ Direct materials purchases Less direct materials inventory, August 31 Cost of direct materials for production $ Direct labor Factory overhead Less finished goods inventory, August 31 Cost of goods sold Gross profit $ Selling expenses Income before income tax
$
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, 2014. The company produces a hand and body lotion in an eight-ounce bottle 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:
Part CAugust 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:
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:
10. Determine and interpret 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). Enter all amounts as positive numbers.
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 SelectFavorableUnfavorableItem 16 SelectFavorableUnfavorableItem 17 SelectFavorableUnfavorableItem 18Enter 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 SelectFavorableUnfavorableItem 34 SelectFavorableUnfavorableItem 35 SelectFavorableUnfavorableItem 3611. Determine and interpret the direct labor rate and time variances for the two departments. Round hours to the nearest hour. Enter the costs in dollars and cents. Enter all amounts as positive numbers.
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 SelectFavorableUnfavorableItem 47 SelectFavorableUnfavorableItem 48 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 SelectFavorableUnfavorableItem 59 SelectFavorableUnfavorableItem 6012. Determine and interpret the factory overhead controllable variance. Enter all amounts as positive numbers.
Actual variable overhead $ Variable overhead at standard cost Factory overhead controllable variance $ Indicate if favorable or unfavorable SelectFavorableUnfavorableItem 6413. Determine and interpret the factory overhead volume variance. When determining the fixed factory overhead rate, round your answer to two decimal places (and use that rounded rate when calculating factory overhead volume variance). Enter all amounts as positive numbers.
Normal volume (cases) Actual volume (cases) Difference Fixed factory overhead rate $ Factory overhead volume variance $ Indicate if favorable or unfavorable SelectFavorableUnfavorableExplanation / Answer
contribution margin per case. = 100 - (17+7.20 + 20 + 0.20)
contribution margin per case. = $ 55.60
Break-even number of cases per month = Total fixed Cost/ Contribution margin per unit
Break-even number of cases per month = 19460/55.60
Break-even number of cases per month = 350 Cases
Break Even Analysis 2014 Case Production Utility Total Cost January 500 $600.00 February 800 $660.00 March 1200 $740.00 April 1100 $720.00 May 950 $690.00 June 1025 $705.00 Question 1 At High Point At Low Point Variable Cost per Unit 0.20 0.20 Total Fixed Cost 500 500 Total Cost 740 600 Question 2 Determine the contribution margin per case.contribution margin per case. = 100 - (17+7.20 + 20 + 0.20)
contribution margin per case. = $ 55.60
Question 3 Utilities Cost 500 Facility Lease 14000 Equipment Depreciation 4300 Supplies 660 Total Fixed Costs 19460 Question 4 Determine the break-even number of cases per month.Related Questions
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