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.
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
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 $62,211 for 6,990 units of direct materials in the production of 2,200 pairs of shoes.
Complete the following table, showing the direct materials variance relationships for July for Sole Purpose Shoe Company. If required, round your answers to two decimal places. When entering variances, use a negative number for a favorable cost variance, and a positive number for an unfavorable cost variance.
![### Explanation of Cost Variance Analysis Diagram
This diagram is structured to calculate and compare actual and standard costs for direct materials, helping to identify variances. It is divided into three main sections: Actual Cost, Hybrid Section, and Standard Cost.
#### 1. Actual Cost Section
- **Actual Quantity**: This field is where the actual number of units utilized is entered.
- **Actual Price**: This field is where the actual price per unit is entered.
- **Calculation**:
- Actual Quantity is multiplied by Actual Price.
- Result is shown in an empty field marked as `$`.
- **Components**: Includes sections to record and analyze the variances.
- **Direct Materials Variance**: Space to enter and explain any variance related to the cost of direct materials.
#### 2. Hybrid Section (Calculating Mix of Actual and Standard)
- **Actual Quantity**: Repeated from the first section for consistency.
- **Standard Price**: This field is where the standard price per unit is entered.
- **Calculation**:
- Actual Quantity is multiplied by Standard Price.
- Result is shown in an empty field marked as `$`.
- **Analysis**:
- **Direct Materials Variance**: Allows for comparison of actual spend against the plan based on standard rates.
#### 3. Standard Cost Section
- **Standard Quantity**: This field is for the standardized number of units expected to be used.
- **Standard Price**: This field is for the standard price per unit.
- **Calculation**:
- Standard Quantity is multiplied by Standard Price.
- Result is shown in an empty field marked as `$`.
- **Components**:
- **Direct Materials Variance**: Offers a place to record variances when comparing standard expectations against actual results.
#### Total Direct Variance
- This section aggregates the variances calculated from each of the sections above, providing a comprehensive view of the cost performance.
- Includes a field for total variance marked with `$`.
This diagram serves as a tool for clear breakdown and analysis, promoting efficient management of resources through variance analysis in educational settings.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Ff098a807-c574-4284-b608-5b79a5895cea%2Ff8e2fd18-8a2c-48cd-b45f-612ea9162215%2Fjhodz49_processed.png&w=3840&q=75)
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