Question

Topper Toys has developed a new toy called the Brainbuster. The company has a standard cost system to help control costs and has established the following standards for the Brainbuster toy: Direct materials: 6 diodes per toy at $0.34 per diode Direct labor: 1.1 hours per toy at $7.40 per hour During August, the company produced 5,200 Brainbuster toys. Production data on the toy for August follow. Direct materials: 76,000 diodes were purchased at a cost of $0.33 per diode. 37,000 of these diodes were still in inventory at the end of the month. Direct labor: 6,320 direct labor-hours were worked at a cost of $48,664 Required: 1. Compute the following variances for August: (Input all amounts as positive values. Do not round your per unit rates, round other intermediate calculations and your final answer to nearest whole dollar. Leave no cells blank - be certain to enter "0" wherever required. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect i.e., zero variance).) a. Direct materials quantity and price variances. Material quantity variance Material price variance (Click to select) (Click to select) b. Direct labor efficiency and rate variances. Labor efficiency variance Labor rate variance (Click to select) (Click to select)

Answer 1

Ans. A 1	Actual quantity purchased =   76,000 diodes
	Actual quantity in ending inventory = 37,000   diodes
	Actual quantity used = Actual quantity purchased - Actual quantity in ending inventory
	76,000 - 37,000   =   39,000   diodes
	*Standard quantity = Actual output * Standard quantity per unit of output
	5,200 * 6 diodes
	31,200 diodes
	Materials quantity variance = (Standard quantity - Actual quantity used) * Standard price
	(31,200 - 39,000) * $0.34
	-7,800 * $0.34
	-$2,652	or   $2,652 unfavorable
Ans. A 2	Materials price variance = (Standard price - Actual price) * Actual quantity purchased
	($0.34 - $0.33) * 76,000
	$0.01 * 76,000
	$760	Favorable
Ans. B 1	Standard direct labor hours = Actual production * Standard hours allowed per unit
	5,200 * 1.1 hours
	5,720 hours
	Labor efficiency (quantity) variance = (Standard hours - Actual hours) * Standard rate
	(5,720 - 6,320) * $7.40
	-600 * $7.40
	-$4,440	or   $4,440 unfavorable
Ans. B 2	Labor rate variance = (Standard rate * Actual hours) - Actual labor cost
	($7.40 * 6,320) - $48,664
	$46,768 - $48,664
	-$1,896	or   $1,896 unfavorable
	*If standard items (rate, price, quantity or hours) are higher than the actual then the variance would be favorable.
	*If standard items (rate, price, quantity or hours) are lower than the actual then the variance would be unfavorable.