#17 Determine Genuine Spice Inc. began operations on January

Determine Genuine Spice Inc. began operations on January- Account

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Genuine Spice Inc. began operations on January 1, 2016. The company produces eight-ounce bottles of hand and lotion called Eternal Beauty. The s 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 A-Break-Even Analysis The management of Genuine Spice Inc. wishes to work out the number of cases required to interrupt even per month. The utility cost, which is a component of factory overhead, maybe a mixed cost. The following information was gathered from the primary six months of operation regarding this cost:

Instructions

1. Determine the fixed and variable portion of the utility cost using the high-low method.

2. Determine the contribution margin per case.

3. Determine the fixed charge per month, including the utility fixed charge from part (1).

4. Determine the reach number of cases per month.

Part B - August Budgets

During July of the present year, the management of genuine spice INC. Asked the controller to organize august manufacturing and earnings report budgets. Demand was expected to be 1,500 cases at $100 per cases for August Inventory planning information is provided as follows:

Finish Goods Inventory

Materials Inventory

There was negligible work in process inventory assumed for either the beginning or end of the month: none was assumed, In addition, ther was no change in the cost per unit or estimated units per case operating data from January.

Instructions

5. Prepare the August production budget.

6. Prepare the August direct materials purchases budget.

7. Prepare the August direct labor budget. Round the hours required for production to the closest hour.

8. Prepare the August factory overhead budget.

9. Prepare the August budgeted income statement, including selling expenses.

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, rated, times, and quantities per case. There were 1500 actual cases produced during August, which was 250 more cases than planned at the start of the month. The actual data for August were as follows.

The prices of the materials were different than standard thanks to fluctuations in market prices. The standard quantity of materials used per case was a perfect standard. The Mixing department used a better grade labor classification during the month, thus causing the particular labor rate to exceed the standard. The Filling Department used a lower grade labor classification during the month, thus causing the particular labor rate to be but standard.

Instructions.

10. Determine and interpret the direct materials price and quantity variances for the three materials.

11. Determine and interpret the direct labor rate and time variances for the 2 departments. Round hours to the nearest hour.

12. Determine and interpret the factory overhead controllable variance.

13. Determine and interpret the factory overhead volume variance.

14. Why are the quality direct labor and direct materials costs within the calculations for parts (10) and (11) supported the particular 1500 case production volume instead of the planned 1250 cases of products utilized in the budgets for parts (6) and (7)?

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Free Chegg Answer

Determine the fixed and variable portion of the utility cost using the high low method.

Solution:

With the high-low method, we'd like to first find the very best and lowest values to then estimate the variable and glued cost. In your case, it might be the month of January (low) and March (high).

Now we'd like to first determine the variable cost by subtracting the high and low values from one another then calculate the ratio of the answer which can represent our variable costs:

$740 - $600 = $140

1,200 – 500 = 700 Case productions

$140 / 700 = $0.2 per Case production

So our variable cost amount to $0.2 per Case production.

Next, we've to work out the fixed costs involved. Since:

Total cost = variable cost + fixed costs

Fixed costs = Total cost – variable costs

Now we will use the knowledge on total costs and variable cost to seek out our fixed costs:

March: $740 – 1,200 * $0.2 = $740 – $240 = $500

January: $600 – 500 * $0.2 = $600 - $100 = $500

If you probably did everything right the fixed costs are going to be equal in both cases. (That is why they're called fixed costs because the always occur no madder what proportion your output is).

Determination of the contribution margin per case?

Selling Price per case $100

Less: Variable costs per case:

Direct materials $17.00

Direct labor $7.20

Utilities [see part (1)] $0.20

Selling expenses $20.00

Total variable costs per case $44.40

Contribution margin per case $ 55.60

Determination of the fixed costs per month, including the Utility fixed cost?

Total fixed costs:

Utilities [see part (1)] $ 500

Facility lease $14,000

Equipment depreciation $4,300

Supplies $660

Total $19,460

Determination of Break-even number of cases per month?

Break Even Sales (Units) = Fixed Costs / Unit Contribution Margin

Break Even Sales (Units) = $19,460 / 55.60 = 350 cases