Royal Essentials, Inc. began operations on January 1, 2008. 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 $80 per case. There is a selling commission of $16 per case. The January direct materials, direct labor, and factory overhead costs are as follows:

During July of the current year, the management of Royal Essentials, Inc., asked the controller to prepare August manufacturing and income statement budgets. Demand was expected to be 1,200 cases at $80 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.

Instructions
1. Prepare the August production budget.
2. Prepare the August direct materials purchases budget.
3. Prepare the August direct labor budget.
4. Prepare the August factory overhead budget.
5. Prepare the August budgeted income statement, including sellingexpenses.

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DIRECT MATERIALS Direct Materials Cost per Case S1.08 6.00 4.80 $11.88 Cost Behavion Units per Case 72 ozS. 24 ozs 12 bottles Cost per Unit Cream base Natural oils Bottle (8-oz.) Variable Variable Variable S0.015 0.250 0.400 DIRECT LABOR Labor Rate per Hour 15.00 Direct Labor Cost Cost Behavior Time Department Mixing Filling per Case $4.20 0.84 5.04 per Case Variable Variable 16.80 min. 4.20 min. 21.00 min 12.00 FACTORY OVERHEAD Cost Behavior Total Cost Utilities Facility lease Equipment depreciation Supplies Mixed Fixed Fixed Fixed S 230 9,694 3,600 600 14,124 Finished Goods Inventory: Cases Cost Estimated finished goods inventory, August , 2008 $3,160 2,100 Desired finished goods inventory, August 31, 2008 100 Materials Inventory: Oils (ozs)(bottles) 260 300 Bottles Cream Base (ozs.) 500 700 Estimated materials inventory, August 1, 2008 Desired materials inventory, August 31, 2008 500 400