Question

Dawson Toys, Ltd., produces a toy called the Maze. The company has recently established a standard cost system to help control costs and has established the following standards for the Maze toy: Direct materials: 6 microns per toy at $0.33 per micron Direct labor: 1.4 hours per toy at $7.30 per hour During July, the company produced 5,200 Maze toys. The toy's production data for the month are as follows: Direct materials: 76,000 microns were purchased at a cost of $0.31 per micron. 37,000 of these microns were still in inventory at the end of the month. Direct labor. 7,880 direct labor-hours were worked at a cost of $60,676. Required: 1. Compute the following variances for July: (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values. Do not round intermediate calculations. Round final answer to the nearest whole dollar amount.) a. The materials price and quantity variances. b. The labor rate and efficiency variances. 1a. Material price variance Material quantity variance 1b. Labor rate variance Labor efficiency variance

Answer 1

Material Price variance = Actual Quantity purchased* (Actual Price - Standard Price)

Material Price variance = 76,000 * ($0.31 - $0.33)

Material Price variance = $1,520 Favorable

Material Quantity variance = Standard Price * (Actual Quantity used - Standard Quantity)

Material Quantity variance = $0.33 * ((76,000-37,000) - (5,200*6))

Material Quantity variance = $2,574 Unfavorable

Labor rate variance = Actual hours * (Actual rate - Standard rate)

Labor rate variance = 7,880 * (($60,676/7,880) - $7.30)

Labor rate variance = $3,152 Unfavorable

Labor efficiency variance = Standard rate * (Actual Hours - Standard Hours)

Labor efficiency variance = $7.30 * (7,880 - (5,200*1.4))

Labor efficiency variance = $4,380 Unfavorable

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