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 $0.32 per micron Direct labor: 1.3 hours per toy at $710 per hour During July, the company produced 5,500 Maze toys. The toy's production data for the month are as follows: Direct materials: 77,000 microns were purchased at a cost of $0.28 per micron. 35,750 of these microns were still in inventory at the end of the month. Direct labor: 7.450 direct labor-hours were worked at a cost of $57,365. Required: 1. Compute the following variances for July (Indicate the effect of each variance by selecting "P" for favorable, "U" for unfavorable, and "None" for no effect (.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.

Answer 1

Particulars |Direct Material SQ SP AQ AP 33000 | 0.32 | 41250 | 0.28 Material Price Variance (MPV) = (SP-AP) AQ >>MPV = 1 0.32 - 0.28 ) * 41250 >>MPV = 1650.00 Favorable Material Quantity Variance ( MQV) = (SQ - AQ) SP >>MQV = ( 33000 - 41250) * 0.32 >>MQV = -2640.00 Unfavorable Note-1 |SQ = Standard Quantity for Actual output SP = Standard Price per Raw material AQ = Actual Quantiity consumed ( 77000 - 35750) AP = Actual Price per Raw material

Particulars Direct Labour SH 7150 SR 7.1 AHP 7450 AR 7.7 Labour Rate Variance (LrV) = (SR - ARAHP >>LRV = ( 7.1 - 7.7 * 7450 >>LRV = -4470 Unfavourable Labour Efficiency Variance ( LEV) = ( SH - AHW) SR >>LEV = ( 7150 - 7450 ) * 7.1 >>LEV = -2130 Unfavourable Note-1 SH = Standard Hours per Actual Output SR = Standard Rate per Hour AHP = Actual Hours Paid AR = Actual Rate per Hour.