Question

E9-4 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 Quantity			Standard Rate			Standard Unit Cost
Shampoo	1.2	oz.		$	0.20	per oz.		$	0.24
Water	10	gal.		$	0.04	per gal.			0.40
Direct labor	0.8	hr.		$	9.00	per hr.			7.20

During the month of July, Collin’s employees gave 300 baths. The actual results were 700 ounces of shampoo used (cost of $182.00), 6,000 gallons of water used (cost of $420), and labor costs for 240 hours (cost of $2,448).

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.)

	Shampoo Water Direct Material 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 Rate Variance Direct Labor Efficiency Variance

Answer 1

Requirement 1
a) For Shampoo
Direct Material Price Variance = Actual Quantity X(Standard price-Actual Price)
For Shampoo
= 700 X (0.20-(182/700))
= 700 X (0.20-0.26)
=$ 42 Unfavourable
For Water
= 6000 X(0.04-420/6000)
= 6000 X(0.04-0.07)
= $$180 unfavourable
Direct Material Quantity Variance = Standard Price X (Standard Quantity -Actual Quantity)
For Shampoo
= 0.20 X ((300*1.2)-700)
= 0.20 X (360-700)
= 68 Unfavourable
b) for Water
= 0.04 X ((300*10)-6000)
= 0.04 X (3000-6000)
= 120 unfavourable
Requirement 2
Direct Labour rate variance = Actual time x ( Standard rate -Actual rate)
= 240X(9.00-(2448/240))
= 240X(9.00-10.20)
= 288 Unfavourable
Direct Labour Efficiency variance =	Standard rate X ( Standard time -Actual time)
= 9.00X((0.8X300)-240)
= 9.00X(240-240)
=0