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Genuine Spice Inc. began operations on January 1 of the current year. The company produces 8-ounce...

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:

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

Determine and interpret the direct materials price and quantity variances for the three materials. For those boxes in which you must enter subtractive or negative numbers use a minus sign. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number. Round your price values for Cream Base to three decimal places and Natural Oils & Bottles to two decimal places.

Direct Materials Price Variance
Cream Base Natural Oils Bottles
Difference
Direct materials price variance

Points:

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Direct Materials Quantity Variance
Cream Base Natural Oils Bottles
Difference
Direct materials quantity variance   

The fluctuation in     caused the direct material price variances. All the Direct material quantity variances were     indicating   .
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Homework Answers

Answer #1
Direct Material variance
Cream Base Natural Oils Bottles
Actual price $1.63 $9.92 $5.25
Standard price 2 9 6
Difference -$0.37 $0.92 -$0.75
Actual quantity (cases) ×1,500 ×1,500 ×1,500
Direct materials price variance -$552.00 $1,380.00 -$1,125.00
F U F
Direct Materials Quantity Variance
Cream Base Natural Oils Bottle
Actual quantity (ozs.)(1500 x AQ) 153,000 46,500 18,750
Standard quantity (ozs.)(1500 x SQ 150,000 45,000 18,000
Difference 3,000 1,500 750
Standard price ×$0.02 ×$0.3 ×$0.500
Direct material quantity variance $60.00 450 375

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