Question

Sole Purpose Shoe Company is owned and operated by Sarah Charles. The company manufactures casual shoes, with manufacturing facilities in your state. Sarah began the business this year, and while she has a great deal of experience in manufacturing popular and comfortable shoes, she needs some help in evaluating her results for the year, and asks for your help. Under normal conditions, Sarah spends $8.40 per unit of materials, and it will take 3.6 units of material per pair of shoes.
a. During July, Sole Purpose Shoe Company incurred actual direct materials costs of $60,632 for 6,890 units of direct materials in the production of 2,175 pairs of shoes. Complete the following table, showing the direct materials variance relationships for July for Sole Purpose Shoe Company. If required, round your answers to two decimal places. When entering variances, use a negative number for a favorable cost variance, and a positive number for an unfavorable cost variance.

Actual Cost								Standard Cost
Actual Quantity	X	Actual Price		Actual Quantity	X	Standard Price		Standard Quantity	X	Standard Price
	X				X
	=				=				=
			Direct Materials     Variance:				Direct Materials   Variance:
					Total Direct Materials     Variance:

b. Under normal conditions, Sarah pays her employees $8.50 per hour, and it will take 2.8 hours of labor per pair of shoes. During August, Sole Purpose Shoe Company incurred actual direct labor costs of $65,610 for 7,290 hours of direct labor in the production of 2,300 pairs of shoes.Complete the following table, showing the direct labor variance relationships for August for Sole Purpose Shoe Company. If required, round your answers to two decimal places. When entering variances, use a negative number for a favorable variance, and a positive number for an unfavorable variance.

Actual Cost								Standard Cost
Actual Hours	X	Actual Rate		Actual Hours	X	Standard Rate		Standard Hours	X	Standard Rate
	X				X
	=				=				=
			Direct Labor     Variance:				Direct Labor     Variance:
					Total Direct Labor     Variance:

c.Sarah has learned a lot from you over the past two months, and has compiled the following data for Sole Purpose Shoe Company for September using the techniques you taught her. She would like your help in preparing a Budget Performance Report for September. The company produced 3,000 pairs of shoes that required 10,500 units of material purchased at $8.20 per unit and 8,100 hours of labor at an hourly rate of $8.90 per hour during the month. Actual factory overhead during September was $23,400. When entering variances, use a negative number for a favorable cost variance, and a positive number for an unfavorable cost variance. Use the data in the following table to prepare the Budget Performance Report for Sole Purpose Shoe Company for September.

Manufacturing Costs	Standard Price	Standard Quantity	Standard Cost Per Unit
Direct materials	$8.40 per unit	3.6 units per pair	$30.24
Direct labor	$8.50 per hour	2.8 hours per pair	23.80
Factory overhead	$2.60 per hour	2.8 hours per pair	7.28
Total standard cost per pair			$61.32

Before Sarah makes any changes based on the Budget Performance Report for September, she wants to be sure she understands the results, and has the following questions for you.

Answer the following questions (1) and (2). All questions pertain to the September data.

1. What caused the total cost variance for direct materials? Check all that apply.

The unfavorable quantity variance dominated the favorable price variance, causing the total cost variance for direct materials to be unfavorable.

A factor other than those listed caused the total cost variance for direct materials.

The actual quantity of direct materials per unit was less than the standard quantity.

The actual price for direct materials per unit was less than the standard price.

The favorable price variance dominated the unfavorable quantity variance, causing the total cost variance for direct materials to be favorable.

2. What caused the total cost variance for direct labor? Check all that apply.

The actual number of labor hours per unit was less than the standard number.

The unfavorable rate variance was larger than the favorable time variance, causing the total cost variance for direct labor to be unfavorable.

A factor other than those listed caused the total cost variance for direct labor.

The favorable time variance was larger than the unfavorable rate variance, causing the total cost variance for direct labor to be favorable.

The actual rate for labor hours per unit was less than the standard rate.

Answer 1

Requirement (a) Actual Cost Standard Cost Standard Quantity Actual Quantity x Standard price Standard Price Actual Quantity xActual Price x $ $ 6890 8,80 6890 8.40 7830 8.40 X X $ 57,876 (2175*3.6) $ 60,632 65,772 Direct Material Direct Material 2,756 U 7,896 F Qty Variance $ Price Variance Total Direct 5,140 F $ Material Variance Requirement (b) Actual Cost Standard Cost Actual Quantity x Standard price Standard Quantity Standard Price Actual rate Actual hours X X $ $ 7290 9.00 7290 8.50 6440 8,50 X X X $ 61,965 (2300 2.8) 65,610 54,740 Direct Labor efficiency Direct Labor 3,645 U 7,225 U rate Variance variance Total Direct 10,870 U $ Material Variance Requirement (c) 1. What caused the total cost variance for the direct materials? The actual quantity of direct materials per unit was less than the standard quantity 2. What caused the total cost variance for the direct labor? A factor other than those listed caused the total cost variance for the direct labor. хх