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 Starting Questions Provide answers to the following questions (1)-(3). 1. Why might Sarah want to use standard costs to compare with her actual costs? . Standard costs allow management to motivate employees by comparing their performance to what it would be under perfect conditions. Management can evaluate the differences between standard costs and actual costs to focus on correcting the cost variances Standard costs give management a cost structure for products that is applicable for the entire life of the business 2. What are some possible drawbacks to using standard costs that Sarah might consider? Check all that apply Employees may focus only on efficiency improvement and their own operations rather than considering the larger objectives of the organization Standards limit operating improvements because employees may be discouraged from improving beyond the standards. Since standards are impossible to attain, they are a distraction from the work at hand. Standards may become "stale in a dynamic manufacturing environment Since standards never change, they do not reflect reality 3. Sarah wants to be sure she understands the basic definitions involved: 2. What are some possible drawbacks to using standard costs that Sarah might consider? Check all that apply Employees may focus only on efficiency improvement and their own operations rather than considering the larger objectives of the organization. Standards limit operating improvements because employees may be discouraged from improving beyond the standards. Since standards are impossible to attain, they are a distraction from the work at hand. Standards may become "stale" in a dynamic manufacturing environment. 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. the standard cost (what the product should cost). A favorable variance is A favorable variance occurs when the actual cost (what the product does cost) is represented by a number, indicating that costs are than expected the standard cost what the product should cost). An unfavorable variance is An unfavorable variance occurs when the actual cost (what the product does cost) is represented by a number, indicating that costs are than expected. heck My Work 2 more Check My Work uses remaining. Sole Purpose Shoe Company Starting Questions Direct Materials Direct Labor Direct Materials actual direct materials costs of $60,632 for 6.890 units of direct materials in the production of 2,175 pairs of shoes laces. When entering variances, use a negative number for a favorable costarice and a positive number for an unfavorable cost variance Standard Price Standard 2.3 Direct Material Variance Total Direct Materials Variance My Work 2 more Check My Work uses remaining All work saved Save and Exit Submit Test for Grading stery Problem: Evaluating Variances from Standard Costs Sole Purpose Shoe Company Starting Questions Direct Materials Direct Labor Direct Materials materials in the production of 2,175 pairs of shoes rable costvarance and a positive number for an unfavorable costrace Standard Cost Standard Price Standard Quantity Standard Price Direct Materials Variance Variance y Work 2 more Check My Work uses remaining Previous Next > All work saved Save and Exit Submit Test for Grading Calculator Mastery Problem: Evaluating Variances from Standard Costs Sole Purpose Shoe Company Starting Questions Direct Materials Direct Labor 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 dire Complete the following table, showing the direct labor variance relationships for August for Sole Purpose Shoe Company. W required, round your answers to two decimal places. When er Actual Cost Actual Hours Actual Rate Actual Hours Direct Labor Variance Check My Work 2 more Check My Work uses remaining 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 58.20 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 3.0 units per pair $30.24 Direct labor $8.50 per hour 28 hours per pair 23.80 $2.70 per hour Factory overhead 7.56 2.8 hours per pair $61.60 Total standard cost per pair Sole Purpose Shoe Company Budget Performance Report For the Month Ended September 30 Budget Performance Report Manufacturing Costs Standard Price Standard Quantity Standard Cost Per Unit Direct materials $8.40 per unit 3.6 units per pair $30.24 Direct labor $8.50 per hour 2.8 hours per pair 23.80 Factory overhead $2.70 per hour 2.8 hours per pair 7.56 Total standard cost per pair $61.60 Solo 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 2 Direct materials Direct labor 4 Factory overhead 5 Total manufacturing costs Check My Work 2 more Check My Work uses remaining. 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? Check all that apply. The favorable price variance dominated the unfavorable quantity variance, causing the total cost variance for direct materials to be favorable The unfavorable quantity variance dominated the favorable price variance, causing the total cost variance for direct materials to be unfavorable The actual price for direct materials per unit was less than the standard price A factor other than those listed caused the total cost variance for direct materials The actual quantity of direct materials per unit was less than the standard quantity 2. What caused the total cost variance for direct labor? Check all that apply The actual number of labor hours per unit was less than the standard number The unfavorable rate variance was larger than the favorable time variance, causing the total cost variance for direct labor to be unfavorable Previous N Final Questions 1. What caused the total cost variance for direct materials? Check all that apply. The favorable price variance dominated the unfavorable quantity variance, causing the total cost variance for direct materials to be favorable. The unfavorable quantity variance dominated the favorable price variance, causing the total cost variance for direct materials to be unfavorable The actual price for direct materials per unit was less than the standard price A factor other than those listed caused the total cost variance for direct materials The actual quantity of direct materials per unit was less than the standard quantity caused the total cost variance for direct labor? Check all that apply. The actual number of labor hours per unit was less than the standard number The unfavorable rate variance was larger than the favorable time variance, causing the total cost variance for direct labor to be unta The actual rate for labor hours per unit was less than the standard rate. A factor other than those listed caused the total cost variance for direct labor, Tho favorable time variance was larger than the unfavorable rate variance, causing the total cost variance for direct labor to be favorable