Question

Mastery Problem: Evaluating Variances from Standard Costs

Sole Purpose Shoe Company

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.

Direct Materials

Under normal conditions, Sarah spends $8.40 per unit of materials, and it will take 3.60 units of material per pair of shoes. During July, Sole Purpose Shoe Company incurred actual direct materials costs of $63,101 for 7,090 units of direct materials in the production of 2,200 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	$			X	$
	= $				= $				= $
			Unfavorable  Direct Materials Price  Variance:				Favorable  Direct Materials Quantity  Variance:
			$				$
					Favorable  Total Direct Materials Cost  Variance:
					$

Feedback

Review Exhibit 6 in the text.

Direct Labor

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 $65,340 for 7,260 hours of direct labor in the production of 2,200 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	$
	= $				= $				= $
			Unfavorable  Direct Labor Rate  Variance:				Unfavorable  Direct Labor Time  Variance:
			$				$
					Unfavorable  Total Direct Labor Cost  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 3,500 pairs of shoes that required 12,250 units of material purchased at $8.20 per unit and 9,450 hours of labor at an hourly rate of $8.90 per hour during the month. Actual factory overhead during September was $28,350. 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

Hey learner! if you have any doubt regarding this answer, feel free to ask me so that i can help you better.

PART 3 - Preparation of budget performance report for sole purpose shoe company.

note - budget performance report includes only last 4 columns ( column 1, 4, 5 & 6) but i have included 2 extra column (column 2 and 3) for calculation purpose. please ignore these 2 column while preparing budget performance report.