Question

E9-5 (Algo) Calculating Direct Materials and Direct Labor Variances (LO 9-3, 9-4 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 Quantity 2.6 oz 24 gal. 0.05 per gal 1.5 hr. Standard Rate S 0.20 per oz. Unit Cost Shampoo 0.52 Water 1.20 Direct labor $12.00 per hr. 18.00 During the month of July, Collin's employees gave 440 baths. The actual results were 770 ounces of shampoo used (cost of $231.00), 7,400 gallons of water used (cost of $592), and labor costs for 380 hours (cost of $4,940). Required: 1. Calculate Suds & Cuts direct materials variances for both shampoo and water for the month of July. 2. Calculate Suds & Cuts direct labor variances for the month of July. Complete this question by entering your answers in the tabs below. ces Required 1 Required 2 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 variance by selecting "F for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).) Shampoo Water Direct Material Price Variance Direct Material Quantity Variance Beouised

Answer 1

Answer)

Data for Direct Material and Direct Labour variances

Particulars	Standard			Actual
	Quantity	Rate	Total Cost	Quantity	Rate	Total Cost
Shampoo	1,144 Ounces	$ 0.20	$ 228.80	770 Ounces	$ 0.30	$ 231.00
Water	10,560 gallons	$ 0.05	$ 528.00	7,400 gallons	$ 0.08	$ 592.00
Direct Labour	660 hours	$ 12.00	$ 7,920.00	380 hours	$ 13.00	$ 4,940.00

Material Variances:

Material Price Variance

Material price variance = (Standard Price – Actual Price) X Actual Quantity consumed

Shampoo:

Material price variance = ($ 0.20 per ounce - $ 0.30 per ounce) X 770 ounces

                                          = $ 77 (Unfavourable)

Therefore material price variance for Shampoo is $ 77 (Unfavourable)

Water:

Material price variance = ($ 0.05 per gallon - $ 0.08 per gallon) X 7,400 gallons

                                          = $ 222 (Unfavourable)

Therefore material price variance for Water is $ 222 (Unfavourable)

Material Quantity Variance

Material Quantity variance = (Standard Quantity – Actual Quantity) X Standard Price

Shampoo:

Material Quantity variance = (1,144 ounces - 770 ounces) X $ 0.20 per ounce

                                                 = $ 74.80 (Favourable)

Therefore material quantity variance for Shampoo is $ 74.80 (Favourable)

Water:

Material Quantity variance = (10,560 gallons – 7,400 gallons) X $ 0.05 per gallon

                                                 = $ 158 (Favourable)

Therefore material quantity variance for Water is $ 158 (Favourable)

Labour Variances:

Labour Rate Variance

Labour rate variance = (Standard Rate – Actual Rate) X Actual Labour hours

                                      = ($ 12.00 - $ 13.00) X 380 labour hours

                                      = $ 380 (Unfavourable)  

Therefore Labour rate variance is $ 380 (Unfavourable)

Labour Efficiency Variance

Labour Efficiency variance = (Standard Labour hours – Actual Labour hours) X Standard Rate per labour hour

                                                         = (660 labour hours – 380 labour hours) X $ 12.00 per Labour hour

                                                         = $ 3,360 (Favourable)  

Therefore Labour Efficiency variance is $ 3,360 (Favourable)

Working Notes:

Calculation of Standard Quantities for Actual output:

Shampoo:

Standard Quantity for Actual output = Standard Quantity per unit of output X Actual output

                                                                  = 2.60 ounces per bath X 440 bathes

                                                                  = 1,144 ounces

Therefore standard shampoo for Actual output of 440 bathes is 1,144 ounces.

      

Water:

Standard Quantity for Actual output = Standard Quantity per unit of output X Actual output

                                                                  = 24 gallons per bath X 440 bathes

                                                                  = 10,560 Gallons

Therefore standard Water for Actual output of 440 bathes is 10,560 Gallons.

Labour:

Standard Labour hours for Actual output = Standard Labour hours per unit of output X Actual output

                                                                          = 1.50 labour hours per bath X 440 bathes

                                                                          = 660 Labour hours

Therefore standard labour hours for Actual output of 440 bathes are 660.