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: 7 microns per toy at $0.34 per micron Direct labor: 1.3 hours per toy at $7.50 per hour During July, the company produced 5,200 Maze toys. Production data for the month on the toy follow: Direct materials: 74,000 microns were purchased at a cost of $0.32 per micron. 28,500 of these microns were still in inventory at the end of the month. Direct labor:7,160 direct labor-hours were worked at a cost of $57,996. Required: 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). Do not round intermediate calculations. Round final answer to the nearest whole dollar.) a. The materials price and quantity variances. Material price variance Material quantity variance b. The labor rate and efficiency variances. Labor rate variance Labor efficiency variance

Answer 1

Correct Answer:

Part a	Material Price Variance	$                        910.00	Favourable-F
	Material quantity variance	$                    3,094.00	Unfavourable-U

Part b	Labour rate variance	$                    4,296.00	Unfavourable-U
	Labour Efficiency variance	$                    3,000.00	Unfavourable-U

Working:

Standard DATA for		5200	Units
	Quantity (SQ)	Rate (SR)	Standard Cost
Direct Material	36400	$            0.34	$      12,376.00
Direct labour	6760	$            7.50	$      50,700.00

Actual DATA for		5200	Units
	Quantity (AQ)	Rate (AR)	Actual Cost
Direct Material	45500	$            0.32	$      14,560.00
Direct labour	7160	$            8.10	$      57,996.00

Material Price Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Quantity
(	$                    0.34	-	$                     0.32	)	x	45500
	910
	Variance		$                 910.00			Favourable-F

Material Quantity Variance
(	Standard Quantity	-	Actual Quantity	)	x	Standard Rate
(	36400	-	45500	)	x	$       0.34
	-3094
	Variance		$             3,094.00			Unfavourable-U

Labour Rate Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Labour Hours
(	$                    7.50	-	$                     8.10	)	x	7160
	-4296
	Variance		$             4,296.00			Unfavourable-U

Labour Efficiency Variance
(	Standard Hours	-	Actual Hours	)	x	Standard Rate
(	6760	-	7160	)	x	$       7.50
	-3000
	Variance		$             3,000.00			Unfavourable-U

End of answer.

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