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 Quantity			Standard Rate			Standard Unit Cost
Shampoo	2.5	oz.		$	0.10	per oz.		$	0.25
Water	23	gal.		$	0.04	per gal.			0.92
Direct labor	1.45	hr.		$	11.00	per hr.			15.95

During the month of July, Collin’s employees gave 430 baths. The actual results were 765 ounces of shampoo used (cost of $153.00), 7,300 gallons of water used (cost of $584), and labor costs for 370 hours (cost of $4,551).

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 variance by selecting "F" for favorable, "U" for unfavorable.)

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.)

Answer 1

Solution:-

1. Calculate Suds & Cuts direct materials variances for both shampoo and water for the month of July :-

Particulars	Amount
Materials variances for shampoo :
Material price variance	= [ 0.10 - 0.25 ] * 765 = 0.15 * 765 = $114.75	unfavorable
Material usage variance	= [ [ 430 * 2.5 ] - 765 ] * 0.10 = [ 1,075 - 765 ] *0.10 = 310 * 0.10 = $31	favorable
Materials variances for shampoo :
Material price variance	= [ 0.04 - 0.09 ] * 7,300 = 0.05 * 7,300 = $365	unfavorable
Material usage variance	= [ [ 430 * 23 ] - 7,300 ] * 0.04 = [ 9890 - 7,300 ] *0.04 = 2,590* 0.04 = $103.6	favorable

2. Calculate Suds & Cuts direct labor variances for the month of July:-

Particulars	Amount
Labor rate variance	= [ 11 - 15.95 ] * 370 = 4.95 * 370 = $1,831.5	unfavorable
Labor efficiency variance	= [ [ 430 * 1.45 ] - 370 ] * 11.00 = [ 623.5 - 370 ] * 11.00 = 253.5 * 11.0 = $2,788.50	favorable