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 $0.31 per micron Direct labor: 1.1 hours per toy at $7.50 per hour During July. the company produced 4,600 Maze toys. The toy's production data for the month are as follows: Direct materials 79,000 microns were purchased at a cost of $0.29 per micron. 38,750 of these microns were still in inventory at the end of the month. Direct labor. 5,560 direct labor-hours were worked at a cost of $45,036. 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). 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. 1a Material price variance Material quantity variance 1b. Labor rate variance Labor efficiency variance

Answer 1

calculation of direct material price variance:

= (Standard price per unit of material - Actual price per unit of material) × Actual quantity

= ($0.31/Micron - $0.29/Micron ) × 79000 Micron = $1580 F

Calculation of direct material quantity variance

=(standard quantity of material required for actual production - actual quantity used) × Standard price per unit

((7 Micron X 4600 Unit)-40250 Pound )X $0.31 = $2496 UF

* Actual Qty used = 79000-38750=40250 Micron

Calculation of direct labor rate variance

= (Standard direct labor rate per hour - actual direct labor rate per hour) × Actual hours used

= ($7.50/hour - $8.10/hour) × 5560 Hours= $3336 UF

* Actual Hourly Rate:=$45036/5560=$8.10 / Hour

Calculation of direct labor efficiency variance:

= (standard hours required for actual production - actual hours used) × standard overhead recovery rate

= (1.1 Hour × 4600 Unit - 5560) × $7.50 = $3750 U F