At the end of the first month of opening your business, you calculate the actual operating costs of the business and the income you earned. You also notice and document the difference in what you budgeted for certain materials and labor against the actual amounts you spent on the same. For your statement of cost of goods sold, use the following data regarding the actual costs incurred by the business over the past month: e Materials purchased: 520,000 o Consumed 80% of the purchased materials e Direct labor: $8,493 e Overhead costs: 53,765 Note: Assume that the beginning materials and ending work in process are zero for the month. Use the following revenue and cost information for the income statement. Note that the revenue you use will depend on the pricing level options you chose in Milestone Two. Also, assume that after accounting for weekends and other holidays, there were 20 business days in the first month of operation. For example, if you chose a sales price of $20 per collar, the actual number of collars sold in the month was 33 per day or 33 x 20 = 660 per month. Established Sales Number of ltems Sold per Price Day Collars $20 33 524 28 $28 23 Leashes $22 28 $26 23 $30 18 Harnesses $25 25 $30 22 S35 20 The other costs incurred by the business include: e General and administrative salaries o Receptionist: $1,950 e Office supplies: $200 e Other business equipment: $150 Variance At the end of the month, you find that the labor and materials spent on manufacturing collars was different from what you estimated: The collar maker had to work nine hours a day instead of eight due to an increased demand for collars. e Because of the increased demand, the hourly rate you paid your employee for making the collars increased to $16.50. e Anincrease in the cost of raw material led the direct material cost per collar to increase to $10. e However, you also made and sold 60 more collars than you expected to sell in the month. Milestone Three - Statement of Cost of Goods Sold Beginning Work in Process Inventory Direct Materials: Materials: Beginning Add: Purchases for month of January S Materials available for use Deduct: Ending materials Materials Used . | Direct Labor i |Overhead i | Total Costs Deduct: Ending Work in Process Inventory ! |Cost of Goods Sold S - 0 20,000 20,000 4,000 16,000 8,493 3,765 S 28,258 S 28,258 Milestone Three - Income Statement Revenue: Collars Leashes Harnesses Total Revenue: Cost of goods sold Gross profit Expenses: General and administrative salaries Office supplies Other business equipment Total Expenses Net Income/Loss 13,200 12,320 12,500 1,950 200 150 38,020 28,258 9,762 2,300.00 7,462.00 Milestone Three - Variance Analysis Data for Variance Analysis: Budgeted Budgeted Actual Actual (Standard) (Standard) Hours/Qty Rate Hours/Qty Rate Labor 160 | S 16.00 180 | S 16.50 8 X 20= 160 hrs 9X20=180 hrs Materials 600 | S 9.10 660 | S 10.00 30X20 = 600 Collars 33 X 20 =660 Variances for Collar Sales Favorable/ Variance Unfavorable Direct Labor Time Variance (Actual Hours - Standard Hours) x Standard Rate S 320.00 Unfavorable Direct Labor Rate Variance (Actual Rate - Standard Rate) x Actual Hours S 90.00 Unfavorable Direct Materials Quantity/Efficiency Variance (Actual Quantity - Standard Quantity) x Standard Price S 546.00 Unfavorable Direct Materials Price Variance (Actual Price - Standard Price) x Actual Quantity S 594.00 Unfavorable