Question

Dawson Toys, Lid.. produces a loy called the Maze. The company has recently established a standard cost system to help control costs and has established the following standards for the Maneloy Direct materials: 7 microns per toy at $ 30 per micron Direct labor 13 hours per loy at $6 80 per hour During July, the company produced 5.200 Maze toys. Production data for the month on the toy follow Direct materiais 75.000 microns were purchased at a cost of 50 20 per micron 29.500 of these microns were Direct labor 7.360 direct labor-hours were worked at a cost of $53.728 inventor e d one Required: 1. Compute the following variances for July indicate the effect of each variance by selecting round intermediate calculations. Round final answer to the nearest whole dolar) for favorable for unfavorable and one or morc o vance Do not a The materials price and quantity variances Matonal price vanance Matna quantity wanance

Answer 1

1-a.
Standard quantity for actual production = Actual units production * Standard quantity per unit = 5200 * 7	36400
Actual quantity used = Quantity purchased - Quantity in inventory at the end of the month = 75000 - 29500	45500
Materials price variance = ( Actual price - Standard price ) * Actual quantity = ( 0.28 - 0.30 ) * 45500	910	F
Materials quantity variance = ( Actual quantity - Standard quantity ) * Standard rate = ( 45500 - 36400 ) * 0.30	2730	U

1-b
Standard hours for actual production = Actual units production * Standard hours per unit = 5200 * 1.3	6760
Actual rate = Actual direct labor cost / Actual direct labor hours = 53728 / 7360	7.30
Labor rate variance = ( Actual rate - Standard rate ) * Actual hours = ( 7.30 - 6.80 ) * 7360	3680	U
Labor efficiency variance = ( Actual hours - Standard hours ) * Standard rate = ( 7360 - 6760 ) * 6.80	4080	U