Question

Under normal conditions, Sarah pays her employees $8.50 per hour, and it will take 2.80 hours of labor per pair of shoes. During August, Sole Purpose Shoe Company incurred actual direct labor costs of $65,880 for 7,320 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	$			X	$
	= $				= $				= $
			Direct Labor   Variance:				Direct Labor   Variance:
			$				$
					Total Direct Labor   Variance:
					$

Budget Performance Report

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 2,500 pairs of shoes that required 8,750 units of material purchased at $8.20 per unit and 6,750 hours of labor at an hourly rate of $8.90 per hour during the month. Actual factory overhead during September was $20,250. 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	3.60 units per pair	$30.24
Direct labor	$8.50 per hour	2.80 hours per pair	23.80
Factory overhead	$2.70 per hour	2.80 hours per pair	7.56
Total standard cost per pair			$61.60

Sole Purpose Shoe Company Budget Performance Report For the Month Ended September 30
Manufacturing Costs	Actual Costs	Standard Cost at Actual Volume	Cost Variance - (Favorable) Unfavorable
Direct materials	$	$	$
Direct labor
Factory overhead
Total manufacturing costs	$	$	$

Answer 1

• Question 1

Actual Cost								Standard Cost
AH	x	AR		AH	x	SR		SH = 2300 units x 2.8 per unit	x	SR
7,320	x	$                  9.00		7,320	x	$          8.50		6,440	x	$                 8.50
	$             65,880.00				$        62,220.00				$             54,740.00
Direct Labor Rate Variance			$         3,660.00 Unfavourable	Direct Labor Efficiency Variance			$         7,480.00 Unfavourable
Total Direct Labor Cost Variance					$                                                                 11,140.00			Unfavourable
Note:
>	Labor Price Variance is Unfavourable because Actual rate (AR) is MORE than Standard Rate (SR)
>	Labor quantity or Efficiency Variance is unfavourable because Actual Hrs (AH) is MORE than Standard Hrs (SH)

• Question 2

Sole Purpose Shoe Company
Budget Performance Report
For the Month Ended September 30
Manufacturing Costs	Actual Costs		Cost Variance -
		Standard Cost at	(Favorable)
		Actual Volume	Unfavorable
Direct materials	$71,750	$75,600	($3,850)
Direct labor	$60,075	$59,500	$575
Factory overhead	$20,250	$18,900	$1,350
Total manufacturing costs	$152,075	$154,000	($1,925)

--Working

Manufacturing Costs	Actual Costs
		Standard Cost at
		Actual Volume
Direct materials	=8750*8.2	=2500*30.24
Direct labor	=6750*8.9	=2500*23.8
Factory overhead	20250	=2500*7.56