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. 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. Standard Standard Standard Cost Manufacturing Costs Price Quantity 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 Cost Variance - Standard Cost at (Favorable) Unfavorable Manufacturing Costs Actual Costs Actual Volume Direct materials Direct labor Factory overhead Total manufacturing costs 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
