Raging Sage Coffee is a franchise that sells cups of coffee from carts in shopping centres. A computerized standard costing system is provided as a part of the franchise package. A portion of the standard cost data follows:

 

In its first month of operation, the Winnipeg franchise recorded the following data:

Coffee sold...........................................................8,260 cups

Coffee beans used..................................................224 kg

Coffee beans purchased.........................................240 kg

Cost of coffee beans purchased.........................$1,800

Clerks€™/brewers€™ total hours.....................................600 hours

Clerks€™/brewers€™ total wages...............................$6,000

The company€™s policy is to record materials price variances at the time materials are purchased.

Required:

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

B. Given your answer to Part A, should a direct labour efficiency variance be calculated? Why or why not?

C. Calculate the direct materials price and efficiency variances.

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

E. Provide possible explanations for the drop in sales.

Transcribed Image Text:

Price $ 6 per kg $10 per hour Quantity 0.04 kg per cup 0.05 hours per cup Coffee beans Clerks/brewers