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: Standard Hours / 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 $                           -

Answer 1

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