Suds & Cuts is a local pet grooming shop owned by Collin Bark. Collin has prepar

Question

Suds & Cuts is a local pet grooming shop owned by Collin Bark. Collin has prepared the following standard cost card for each dog bath given Standard Standard QuanttyStandard Rate Unit Cost 2.9 oz. $ 0.50 per oz. 27 gal. 0.04 per gal. S 1.45 1.08 19.80 Water Direct labon 1.65 hr. $12.00 per hr. During the month of July, Collin's cmployees gave 470 baths. The actual results were 785 ounces of shampoo used (cost of $471.00), 7,700 gallons of water used (cost of $616), and labor costs for 410 hours (cost of $5,371) Required: 1. Calculate Suds & Cuts direct materials variances for both shampoo and water for the month of July. (Round your answers to 2 decimal places. Indicate the effect of each varlance by selecting "F" for favorable, "U" for unfavorable.) Shampoo Water Direct Matcrial Price Variance Direct Material Quantity Variance 2. Calculate Suds & Cuts direct labor variances for the month of July. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable. Round your answers to nearest dollar amount.) Direct Labor Ratc Varianco Direct Labor Efficiency Variance

Explanation / Answer

Since there is no information on Opening Stock and Closing stock, we will presume that there is no opening stock and closing stock

Solution A:

It should be noted that Direct Material Cost variance is total of direct material price variance and direct material quantity variance.

Material Price variance is calculated using the formulae as

= (Actual Price-Standard Price)*Quantity Purchased

= Actual Price*Quantity Purchased -Standard Price*Quantity Purchased

Shampoo

= $471 – $0.5*785

= $78.5 Favorable

Water

= $616 – $0.04*7,700

= $308 Unfavorable

Material Quantity Variance is calculated using the formulae as

= (Actual Quantity used- Standard Quantity used)*Standard rate

Shampoo

= (785 – 470*2.9)* 0.5

= 289 Favorable

Standard quantity of shampoo consumed per bath is 2.9 oz. Hence for 470 baths, it is 470 *2.9 oz

Water

= (7700– 470*27)* 0.04

= 199.6 Favorable

Solution-B:

It should be noted that Direct Labor Cost variance is total of Labor Rate variance and Labor Time/ Efficiency variance.

Labor Rate variance is calculated using the formulae as

= (Actual Rate-Standard Rate)*Actual Labor hour

= Actual Rate*Actual Labor hour -Standard Rate*Actual Labor hour

= 5,371 – 12*410

= $451 Unfavorable

Labor Time/ Efficiency variance is calculated using the formulae as

= (Actual hours used- Standard hours used)*Standard rate

= (410 – 470*1.65) * 12

= $4,386 Favorable

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