HOME WORK 11.32 Raging Sage coffee is a franchise that sells cups of coffee from a cart in shopping centers. A computerized standard costing system is provided as a part of the franchise package. A portion of the standard cost data follows PRICE QUANTITY Coffee beans $6 per lb. 0.04lbs per cup Clerk/brewer $10 per hr.0.05hr per cup

In its first month of operation, the Philadelphia franchise recorded the following data Coffee sold 8,260 cups Coffee beans used 224lbs Coffee beans purchased 240lbs Cost of coffee beans purchased $1,800 Clerk/brewers total hours 600hrs Clerk/brewers total wages $6000

The companys policy is to record materials price variances at the time materials are purchased

A.Are direct labor hours for the cart most likely fixed or variable? Explain

B. Given your answer to part (A), should a direct labor efficiency variance be calculated? Why or Why not

C. Calculate the direct price and efficiency variances

D. How many cups of coffee did the franchise owners expect to sell this period? Compare this estimates to the amount actually sold.

E. Provide possible explanations for the drop sales

F.Suppose the clerks/brewers currently receive a bonus based on their ability to control costs as measured using cost variances. Recommend a bonus system that might help the owners contain costs but also increase sales