Question

Genuine Spice Inc. began operations on January 1, 2016. Thecompany produces eight-ounce bottles of hand and body lotion calledEternal Beauty. The lotion is sold wholesale in 12-bottle cases for$100 per case. There is a selling commission of $20 per case. TheJanuary direct materials, direct labor, and factory overhead costsare as follows:

DIRECT MATERIALS
	Cost Behavior	Units per Case	Cost per Unit	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	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

During September of the current year, the controller was askedto perform variance analyses for August. The January operating dataprovided the standard prices, rates, times, and quantities percase. There were 1,500 actual cases produced during August, whichwas 250 more cases than planned at the beginning of the month.Actual data for August were as follows:

	Actual Direct Materials
	Price per Unit	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
	Actual Direct	Actual Direct Labor
	Labor Rate	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 tofluctuations in market prices. The standard quantity of materialsused per case was an ideal standard. The Mixing Department used ahigher grade labor classification during the month, thus causingthe actual labor rate to exceed standard. The Filling Departmentused a lower grade labor classification during the month, thuscausing the actual labor rate to be less than standard.

1. Determine and interpret the direct materials price andquantity variances for the three materials.

Direct Materials Price Variance
	Cream Base		Natural Oils		Bottles
Actual price
Standard price
Difference
X Actual quantity		ozs.		ozs.		btls.
Direct materials price variance		F		U		F

Direct Materials Quantity Variance
	Cream Base		Natural Oils		Bottles
Actual quantity		ozs.		ozs.		btls.
Standard quantity
Difference		ozs.		ozs.		btls.
X Standard price
Direct materials quantity variance		U		U		U

2. Determine the direct labor rate and time variances forthe two departments. Round hours to the nearest tenth of anhour.

Direct Labor Rate Variance
	Mixing Department		Filling Department
Actual rate
Standard rate
Difference
X Actual time
Direct labor rate variance		U		F

Direct Labor Time Variance
	Mixing Department		Filling Department
Actual time
Standard time
Difference
X Standard rate
Direct labor time variance		F		U

3. Determine and interpret the factory overhead controllablevariance.

Factory Overhead Controllable Variance
Actual variable overhead
Variable overhead at standard cost
Factory overhead controllable variance		U

4. Determine and interpret the factory overhead volumevariance. Round rate to four decimal places.

Factory Overhead Volume Variance
Normal volume (cases)
Actual volume (cases)
Difference
X Fixed factory overhead rate
Factory overhead volume variance		U