Question

Under normal conditions, Sarah spends $8.40 per unit of materials, and it will take 3.6 units of material per pair of shoes. During July, Sole Purpose Shoe Company incurred actual direct materials costs of $63,810 for 7,090 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

A variance that occurs when the actual cost is less than standard cost.

, and a positive number for an unfavorable cost variance

A variance that occurs when the actual cost exceeds the standard cost.

.

Actual Cost								Standard Cost
Actual Quantity	X	Actual Price		Actual Quantity	X	Standard Price		Standard Quantity	X	Standard Price
	X				X
	=				=				=
			selector 1Unfavorable Favorable Unfavorable Direct Materials selector 2Price Time Rate Quantity Cost Price Variance:				selector 3Favorable Unfavorable Favorable Direct Materials selector 4Quantity Price Time Rate Cost Quantity Variance:
					selector 5Favorable Favorable Unfavorable Total Direct Materials selector 6Cost Cost Price Time Quantity Rate Variance:
You are in Column Actual Cost	You are in Column Actual Cost	You are in Column Actual Cost						You are in Column Standard Cost	You are in Column Standard Cost	You are in Column Standard Cost

Points:

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Explanation

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X

Direct Labor

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 $65,340 for 7,260 hours of direct labor in the production of 2,100 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
	=				=				=
			selector 1 Favorable Unfavorable Direct Labor selector 2 Quantity Price Cost Time Rate Variance:				selector 3 Favorable Unfavorable Direct Labor selector 4 Quantity Rate Price Time Cost Variance:
					selector 5 Unfavorable Favorable Total Direct Labor selector 6 Cost Rate Quantity Time Price Variance:
You are in Column Actual Cost	You are in Column Actual Cost	You are in Column Actual Cost

Answer 1

Actual Cost								Standard Cost
Actual Quantity	X	Actual Price		Actual Quantity	X	Standard Price		Standard Quantity	X	Standard Price
7090	X	9		7090	X	8.4		7830		8.4
	=	63810			=	59556			=	65772
			Unfavorable		4254		Favorable		-6216
			Direct Materials				Direct Materials Quantity
			Price				Quantity
			Variance:				Variance:
					Favorable	-1962
					Total Direct Materials
					Cost
					Variance:
You are in Column Actual Cost	You are in Column Actual Cost	You are in Column Actual Cost						You are in Column Standard Cost	You are in Column Standard Cost	You are in Column Standard Cost

Direct Material Price Variance= Actual cost of actual quantity – Standard cost of Actual quantity

= (Actual quantity*Actual price)- (Actual quantity*Standard price)

= (7090*9) - (7090*8.4)

= 4254 (Unfavorable) – we have purchased at a higher price

Direct Material Usage Variance= Standard cost of Actual quantity – Standard cost of standard quantity

= (Actual quantity*Standard price)- (Standard quantity*Standard price)

= (7090*8.4) - (7830*8.4)

= 6216 (Favorable)- we have used lesser quantity of material

Total Direct Material Cost variance = Actual cost – Standard cost

= 63810-65772

=1962 (Favorable)- we have incurred lesser cost than standard cost.

Actual Cost								Standard Cost
Actual Hours	X	Actual Rate		Actual Hours	X	Standard Rate		Standard Hours	X	Standard Rate
7260	X	9		7260	X	8.5		5880		8.5
	=	65340			=	61710			=	49980
			Unfavorable		3630		Unfavorable	11730
			Direct Labor				Direct Labor
			Rate				Quantity
			Variance:				Variance:
					Unfavorable	15360
					Total Direct Labor
					Cost
					Variance:
You are in Column Actual Cost	You are in Column Actual Cost	You are in Column Actual Cost

Direct Labor Rate Variance= Actual rate of actual hours – Standard rate of Actual hours

= (Actual hours*Actual rate)- (Actual hours*Standard rate)

= (7260*9) - (7260*8.5)

= 3630 (Unfavorable) – we have hired at a higher price

Direct Labor Efficiency Variance= Standard cost of Actual hours – Standard cost of standard hours

= (Actual hours*Standard rate)- (Standard hours*Standard rate)

= (7260*8.5) - (5880*8.5)

= 11730 (Unfavorable)- Labor has worked with lesser efficiency.

Total Direct Labor Cost variance = Actual cost – Standard cost

= 65340-49980

=15360 (Unfavorable)- we have incurred more cost than standard cost.