Shari Greenshade, CPA, has her own accounting firm in Sioux Falls, South Dakota. Shari recently and successfully bid on a job for a local retailer. This particular client wanted Shari to streamline the store’s inventory and book-keeping systems, and to educate his staff about how to maintain the books using a PC and software such as Quickbooks®. Shari bid $9,000 for the job. She arrived at this bid in the following way. First, Shari budgeted a total of 150 hours for the job, 50 hours of her own time, and 100 hours of her assistant’s time. Next, Shari budgeted her cost at $50 per hour and her assistant’s cost at $20 per hour. Finally, Shari added a 100% markup to her total budgeted labor cost to arrive at her bid; in other words, [($50 × 50 hours) + ($20 per hour × 100 hours)] × 2 = $9,000.

Shari recently completed the job, and the storeowner could not have been more pleased with the quality and reliability of the service provided. To help her in future bids, Shari wanted to calculate her profit from this job. While Shari received the $9,000 in full from the storeowner, she calculated that she actually spent 70 hours on the assignment, whereas her assistant spent 65 hours on the assignment (Shari underestimated her hours and overestimated her assistant’s hours). The actual cost per hour for both Shari’s and her assistant’s time, however, equaled the budgeted cost $50 and $20, respectively.

Required:

a. What were Shari’s master budget profit and actual profit from this job?

b. Compute the price and quantity variances for both Shari’s labor and the labor of her assistant.

c. Compute the total labor quantity variance. Does this explain the difference between Shari’s actual profit and master budget profit? Do you believe it makes more sense for Shari to compute the labor quantity variance for each type of labor or in total?