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. Starting Questions Sarahs first questions for you have to do with the general ideas and terminology used to evaluate variances. Provide answers to the following questions (1)-(3). 1. Why might Sarah want to use standard costs to compare with her actual costs? a. Standard costs give management a cost structure for products that is applicable for the entire life of the business. b. Standard costs allow management to motivate employees by comparing their performance to what it would be under perfect conditions. c. Management can evaluate the differences between standard costs and actual costs to focus on correcting the cost variances. 2. What are some possible drawbacks to using standard costs that Sarah might consider? a. Standards limit operating improvements because employees may be discouraged from improving beyond the standards. b. Standards may become stale in a dynamic manufacturing environment. c. Employees may focus only on efficiency improvement and their own operations rather than considering the larger objectives of the organization. d. Since standards are impossible to attain, they are a distraction from the work at hand. e. Since standards never change, they do not reflect reality. 3. Sarah wants to be sure she understands the basic definitions involved: Answer the following questions by selecting the correct words. A favorable variance occurs when the actual cost (what the product does cost) is the standard cost (what the product should cost). A favorable variance is represented by a number, indicating that costs are than expected. An unfavorable variance occurs when the actual cost (what the product does cost) is the standard cost (what the product should cost). An unfavorable variance is represented by a number, indicating that costs are than expected. Question Content Area 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 $62,211 for 6,990 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 fill in the blank 92feed0c8f86f87_1 X $fill in the blank 92feed0c8f86f87_2 fill in the blank 92feed0c8f86f87_3 X $fill in the blank 92feed0c8f86f87_4 fill in the blank 92feed0c8f86f87_5 X $fill in the blank 92feed0c8f86f87_6 = $fill in the blank 92feed0c8f86f87_7 = $fill in the blank 92feed0c8f86f87_8 = $fill in the blank 92feed0c8f86f87_9 Direct Materials Variance: Direct Materials Variance: $fill in the blank 92feed0c8f86f87_14 $fill in the blank 92feed0c8f86f87_15 Total Direct Materials Variance: $fill in the blank 92feed0c8f86f87_18 Question Content Area 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 2,300 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 fill in the blank 58b1ae0ce04801c_1 X $fill in the blank 58b1ae0ce04801c_2 fill in the blank 58b1ae0ce04801c_3 X $fill in the blank 58b1ae0ce04801c_4 fill in the blank 58b1ae0ce04801c_5 X $fill in the blank 58b1ae0ce04801c_6 = $fill in the blank 58b1ae0ce04801c_7 = $fill in the blank 58b1ae0ce04801c_8 = $fill in the blank 58b1ae0ce04801c_9 Direct Labor Variance: Direct Labor Variance: $fill in the blank 58b1ae0ce04801c_14 $fill in the blank 58b1ae0ce04801c_15 Total Direct Labor Variance: $fill in the blank 58b1ae0ce04801c_18 Question Content Area 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 3,000 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 $24,300. 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 $fill in the blank 3f5d18013f87fca_1 $fill in the blank 3f5d18013f87fca_2 $fill in the blank 3f5d18013f87fca_3 Direct labor fill in the blank 3f5d18013f87fca_4 fill in the blank 3f5d18013f87fca_5 fill in the blank 3f5d18013f87fca_6 Factory overhead fill in the blank 3f5d18013f87fca_7 fill in the blank 3f5d18013f87fca_8 fill in the blank 3f5d18013f87fca_9 Total manufacturing costs $fill in the blank 3f5d18013f87fca_10 $fill in the blank 3f5d18013f87fca_11 $fill in the blank 3f5d18013f87fca_12 Question Content Area Final Questions 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? a. The actual quantity of direct materials per unit was less than the standard quantity. b. The actual price for direct materials per unit was less than the standard price. c. The favorable price variance dominated the unfavorable quantity variance, causing the total cost variance for direct materials to be favorable. d. The unfavorable quantity variance dominated the favorable price variance, causing the total cost variance for direct materials to be unfavorable. e. A factor other than those listed caused the total cost variance for direct materials. 2. What caused the total cost variance for direct labor? a. The actual number of labor hours per unit was less than the standard number. b. The unfavorable rate variance was larger than the favorable time variance, causing the total cost variance for direct labor to be unfavorable. c. The favorable time variance was larger than the unfavorable rate variance, causing the total cost variance for direct labor to be favorable. d. The actual rate for labor hours per unit was less than the standard rate. e. A factor other than those listed caused the total cost variance for direct labor.