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: 1.2 hours per toy at $6.60 per hour During July, the company produced 5,300 Maze toys. Production data for the month on the toy follow Direct materials: 72,000 microns were purchased at a cost of $0.30 per micron. 32,250 of these microns were still in inventory at the end of the month Direct labor: 6,860 direct labor-hours were worked at a cost of $48,706 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). 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

Part a
	Standard Price per micron =$0.33
	Standard quantity =5300 units*6 =31,800 microns
	Actual Price per micron =$0.30
	Actual quantity produced =72000 - 32,250 =39,750 microns
	Material Price variance = (Standard price - Actual Price)*Actual quantity
	Material Price variance = ($0.33 - $0.30)*39,750 =$1,193(F)
	Material quantity variance = Standard price(Standard Quantity - Actual Quantity)
	Material quantity variance = $0.33(31,800 microns - 39,750 microns) =$2,624(U)
Part b	Standard Rate per hour =$6.60 per hour
	Standard Hours =1.20 hours*5,300 =6,360 hours
	Actual Rate per hour =$7.10 per hour
	Actual hours worked =6,860 hours
	Labor rate variance =Actual hours(Standard rate - Actual rate)
	Labor efficiency variance =Standard Rate(Actual Hours - Standard Hours)
	Labor rate variance =6,860 hours*($6.60 - $7.10) =$3,430(U)
	Labor efficiency variance =$6.60*(6,860 - 6,360) =$3,300(U)