Overview: In the third milestone, you will jump forward in time: Imagine that yo
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Question
Overview: In the third milestone, you will jump forward in time: Imagine that your business has already opened. Use the updated scenario information to analyze your company’s performance. Post-opening Scenario: Your angel investors are silent in relation to the business; however, they require board meetings for status updates on the company’s financial health. Therefore, you need to analyze your company’s performance over the last month using the data provided below. Note: Your instructor will create an announcement sharing the income statement data by the end of Module Four. All of the data you need for the cost-ofservices statement can be found in the “COS Schedule” tab of your workbook. For your variance analysis, use the following financial data:
Direct Materials/Labor Original Projection Actual
Shampoo 1000 ounces ($2/groom) 1200 ounces ($3/groom)
Grooming Labor 1.5 hrs/groom @ $12 2.25 hrs/groom @ $11.50
Prompt: Complete your work in the provided workbook by assessing your company’s financial performance, specifically addressing the following critical elements:
? Financial Statements
? Create a statement of cost of services in the “COS Schedule” tab.
? Create an income statement in the “Income Statement” tab. ?
Variance Analysis
? Identify all variances for the direct labor time and the materials price in the “Variances” tab.
? Evaluate the significance of the variances in the “Variances” tab.
? Incorporate all feedback from previous milestones to finalize your workbook
Houston Precious Kennels MILESTONE 3 - Statement of Cost of Services INSTRUCTIONS: The following are the actual numbers for January: Materials Purchased $5,000 of Materials Consumed 40% of those purchased materials Direct Labor Direct Labor was $6,240 Factory Overhead Factory Overhead was $2,800 Houston Precious Kennels Statement of Cost of Services For the Month Ended January 31, xxxx Beginning Work-in-Process Inventory $ - Direct Materials: Materials - Beginning $ - Add: Purchases for month of January - Materials Available for Use $ - Deduct: Ending Materials - Materials Used $ - Direct Labor - Factory Overhead - Total Manufacturing Overhead $ - Deduct: Ending Work-in-Process Inventory - Cost of Services $ - Houston Precious Kennels MILESTONE 3 - Income Statement INSTRUCTIONS: Complete the statement in proper form. Revenue will be provided in an announcement at the end of Module 4 (based on actual number of services for your pricing levels). Additional information necessary to complete the income statement: General and Administrative Salaries paid = $1,200 Advertising = $100 Cleaning Products = $120 Depreciation = $83 Rent = $650 Loan = $420 Utilities and Insurance = $600 Houston Precious Kennels Income Statement For the Month Ended January 31, xxxx Revenue: Grooming $ - Day Care - Boarding - Total Revenue $ - Cost of Goods Sold * - Gross Profit $ - Expenses: G&A Salaries $ - Advertising - Cleaning Products - Depreciation - Rent - Loan - Utilities and Insurance - Total Expenses $ - Net Income / Loss $ - * Cost of Goods Sold = Cost of Services (COS) There is no finished goods inventory to maintain. Houston Precious Kennels MILESTONE 3 - Variance Analysis INSTRUCTIONS: Prepare the variances and identify whether they are favorable or unfavorable. The below website will provide further assistance with variances: http://accounting-simplified.com/management/variance-analysis/material/price.html DATA FOR VARIANCE ANALYSIS: StandardHours / Qty Standard
Rate Actual
Hours / Qty Actual
Rate Grooming Labor 150 $ 12.00 180 $ 11.50 Grooming Materials 1,000 $ 2.00 1,200 $ 3.00 Variance Favorable/
Unfavorable Groomer Direct Labor Time Variance (Actual Hours - Standard Hours) x Standard Rate $ - Groomer Direct Labor Time Variance (Actual Rate - Standard Rate) x Actual Hours $ - Groomer Direct Labor Time Variance (Actual Quantity - Standard Quantity) x Standard Price $ - Groomer Direct Labor Time Variance (Actual Price - Standard Price) x Actual Quantity $ -
Explanation / Answer
1. COGM - There is no opening or shutting work in progress
Statement of Cost of Goods Sold
Starting work in advance
-
Direct Materials
Materials - Beginning Inventory
Add: Purchases during January
5,000.00
Deduct: Ending Materials (60%)
3,000.00
Materials used in production
2,000.00
Direct Labor
6,240.00
Factory Overhead
2,800.00
Total Manufacturing OH
11,040.00
Deduct: Ending Work in Progress
-
Cost of Goods Manufactured
11,040.00
2. Sales reveue is based on selected price levels. I have used the price levels you have selected in break even analysis
Sales Revenue
Grooming
Daycare
Boarding
Sales Price per unit(A)
25
18
25
No of units per day(B)
4
22
12
No of Days(C)
30
30
30
Sales Revenue (AxBxC)
3000
11880
9000
Income Statement
Revenue
Grooming
3,000.00
Day Care
11,880.00
Boarding
9,000.00
23,880.00
Cost of Goods sold
11,040.00
Gross Profit
12,840.00
G & A Salaries
1,200.00
Advertising
100.00
Cleaning Products
120.00
Depreciation
83.00
Tax Expense
-
Rent
650.00
Loan
420.00
Utilities and Insurance
600.00
Total Expense
3,173.00
Net Income/(Loss)
9,667.00
3.
Variances
Groomer Direct Labor Time Variance
DL Time Variance (AH-SH) x SR
(180-150)*12
360
ominous
Hours required for preparing a similar number of mutts is more than spending plan. Thus the change is ominous
Groomer Direct Labor Rate Variance
DL Rate Variance (AR-SR) x AH
(11.50-12)*180
-90
Favorable
Actual rate is lower than standard rate. This will result in savings increasing the income. Hence variance is favorable
Direct Materials Efficiency
DM Quantity Variance (AQ - SQ) x SP
(1200-1000)*2
400
Unfavorable
Real rate is lower than standard rate. This will bring about investment funds expanding the wage. Consequently fluctuation is good
Direct Materials Price Variance
DM Price Variance (AP-SP) x AQ
(3-2)*1200
1200
Unfavorable
Rate of DM is more than the standard bringing about loss of salary. Consequently difference is ominous
Statement of Cost of Goods Sold
Starting work in advance
-
Direct Materials
Materials - Beginning Inventory
Add: Purchases during January
5,000.00
Deduct: Ending Materials (60%)
3,000.00
Materials used in production
2,000.00
Direct Labor
6,240.00
Factory Overhead
2,800.00
Total Manufacturing OH
11,040.00
Deduct: Ending Work in Progress
-
Cost of Goods Manufactured
11,040.00
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