Comprehensive Problem 5 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 of the current year. The company produces 8-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:

Products	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
Total direct materials cost per case				$17.00

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 min.	14.40	1.20
Total direct labor cost per case		25 min.		$7.20

Line Item Description	Cost Behavior	Total Cost
Utilities	Mixed	$600
Facility lease	Fixed	14,000
Equipment depreciation	Fixed	4,300
Supplies	Fixed	660
Total cost		$19,560

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:

Products	Actual Direct Materials Price per Unit	Actual Direct Materials Quantity per Case
Cream base	$0.016 per oz.	102 ozs.
Natural oils	$0.32 per oz.	31 ozs.
Bottle (8-oz.)	$0.42 per bottle	12.5 bottles

Line Item Description	Actual Direct Labor Rate	Actual Direct Labor Time per Case
Mixing	$18.20	19.50 min.
Filling	14.00	5.60 min.
Actual variable overhead	$305.00
Normal volume	1,600 cases

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:

Enter subtracted amounts with minus sign.

Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.

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 a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number. Direct Materials Price Variance: Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number. Direct Materials Price Variance: Direct Labor Rate Variance: Direct Labor Time Variance: \begin{tabular}{|c|c|c|c|c|c|} \hline \multirow[b]{2}{*}{ Actual time (hours) } & \multicolumn{2}{|c|}{ Mixing Department } & \multicolumn{3}{|c|}{ Filling Department } \\ \hline & 487.5 & V & & 140 & \\ \hline Standard time (hours) & 500 & x & & 125 & x \\ \hline Difference & -12.5 & & & 15 & \\ \hline Standard rate & $ & & $ & 14.4 & V \\ \hline Direct labor time variance & -225 & & $ & 216 & \\ \hline Indicate if favorable or unfavorable & Favorable & V & Unfav & ble & V \\ \hline \end{tabular} 12. Determine and interpret the direct labor rate and time variances for the two departments. 13. Determine and interpret the factory overhead volume variance. Round rate to four decimal places and round your final answer to two decimal places. 14. The production volume of standard cost must be based on the X cases was planned at the beqinning of Auqust. The variances compare the actual cost and the standard cost of un for the month. Thus, the