Direct LaborUnder 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 $65,340 for 7,260 hours of direct labor in the production of 2,100 pairs of shoes.Complete the following table, showing the direct labor variance relationships for August for Sole Purpose Shoe Company. If required, round your answers to two decimal places. When entering variances, use a negative number for a favorable variance, and a positive number for an unfavorable variance. Direct Labor - (unfavorable, favorable)Variance - (cost, price, quantity, rate, time) **Direct Labor Cost Analysis**The diagram provides a framework for analyzing direct labor costs, focusing on both actual and standard costs to determine labor variances.**Actual Cost Calculation:**1. **Actual Cost of Labor:** - **Actual Hours** x **Actual Rate** = *Calculated Cost* ($). - Showcases the actual cost incurred for labor.2. **Comparison with Standard Rate:** - **Actual Hours** x **Standard Rate** = *Calculated Cost* ($). - This compares actual hours worked with the standard rate set.3. **Variance Analysis:** - **Direct Labor Variance**: - Difference between the actual cost of labor and the cost calculated with actual hours at standard rate.**Standard Cost Calculation:**4. **Standard Cost of Labor:** - **Standard Hours** x **Standard Rate** = *Calculated Cost* ($). - Represents the expected labor cost according to standard hours and rates predetermined.**Total Direct Labor Variance:**5. This section calculates the overall variance by comparing the actual cost ($) with the standard cost ($).The diagram guides users through systematically comparing actual labor performance with expected standards to determine areas where variances occur, crucial for budgeting and management decision-making.

Name: Direct LaborUnder normal conditions, Sarah pays her employees $8.50 pe
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Description: Direct LaborUnder 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 lab

The variance is the difference between the actual and standard costs for production. The variance can be classified as favorable or unfavorable.SH = 2.80*2,100 = 5,880 hoursSR = $8.50 per hourAH = 7,260AR = $65,340/7,260 = $9 per hourActual costStandard costAH*ARAH*SRSH*SR7,260*$97,260*$8.505,880*$8.50=$65,340$61,710=$49,980Unfavorable direct laborRate varianceUnfavorable direct laborEfficiency variance$3,630$11,730Direct labor rate variance$3,630UnfavorableDirect labor efficiency variance$11,730UnfavorableTotal direct labor variance$15,360Unfavorable

Answered: Under normal conditions, Sarah pays her…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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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 2,100 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.

Direct Labor - (unfavorable, favorable)

Variance - (cost, price, quantity, rate, time)

**Direct Labor Cost Analysis**

The diagram provides a framework for analyzing direct labor costs, focusing on both actual and standard costs to determine labor variances.

**Actual Cost Calculation:**

1. **Actual Cost of Labor:**
- **Actual Hours** x **Actual Rate** = *Calculated Cost* ($).
- Showcases the actual cost incurred for labor.

2. **Comparison with Standard Rate:**
- **Actual Hours** x **Standard Rate** = *Calculated Cost* ($).
- This compares actual hours worked with the standard rate set.

3. **Variance Analysis:**
- **Direct Labor Variance**:
- Difference between the actual cost of labor and the cost calculated with actual hours at standard rate.

**Standard Cost Calculation:**

4. **Standard Cost of Labor:**
- **Standard Hours** x **Standard Rate** = *Calculated Cost* ($).
- Represents the expected labor cost according to standard hours and rates predetermined.

**Total Direct Labor Variance:**

5. This section calculates the overall variance by comparing the actual cost ($) with the standard cost ($).

The diagram guides users through systematically comparing actual labor performance with expected standards to determine areas where variances occur, crucial for budgeting and management decision-making.

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