Question

Topper Toys has developed a new toy called the Brainbuster. The company has a standard cost system to help control costs and has established the following standards for the Brainbuster toy: Direct materials: 7 diodes per toy at $0.33 per diode Direct labor. 1.2 hours per toy at $6.50 per hour During August, the company produced 5,200 Brainbuster toys. Production data on the toy for August follow:. Direct materials: 74,000 diodes were purchased at a cost of $0.30 per diode. 28,500 of these diodes were still in inventory at the end of the month. Direct labor. 6,640 direct labor-hours were worked at a cost of $45,816. Required: 1. Compute the following variances for August (Input all amounts as positive values. Do not round your per unit rates, round other intermediate calculations and your final answer to nearest whole dollar. Leave no cells blank - be certain to enter "0" wherever required. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).) a. Direct materials quantity and price variances. (Click to select) Material quantity variance (Click to select) Material price variance b. Direct labor efficiency and rate variances. (Click to select) Labor efficiency variance (Click to select) v Labor rate variance

Answer 1

Answer a.

Actual output = 5,200

Actual materials purchased = 74,000 diodes
Actual materials in inventory = 28,500 diodes

Actual materials used = Actual materials purchased - Actual materials in inventory
Actual materials used = 74,000 - 28,500
Actual materials used = 45,500 diodes

Standard materials allowed = Actual output * Standard materials per toy
Standard materials allowed = 5,200 * 7
Standard materials allowed = 36,400 diodes

Material quantity variance = Standard price per diodes * (Actual materials used - Standard materials allowed)
Material quantity variance = $0.33 * (45,500 - 36,400)
Material quantity variance = $3,003 Unfavorable

Material price variance = Actual materials purchased * (Actual price per diodes - Standard price per diodes)
Material price variance = 74,000 * ($0.30 - $0.33)
Material price variance = $2,220 Favorable

Answer b.

Actual output = 5,200

Standard labor hours allowed = Actual output * Standard labor hours per toy
Standard labor hours allowed = 5,200 * 1.20
Standard labor hours allowed = 6,240

Labor efficiency variance = Standard rate per hour * (Actual labor hours worked - Standard labor hours allowed)
Labor efficiency variance = $6.50 * (6,640 - 6,240)
Labor efficiency variance = $2,600 Unfavorable

Labor rate variance = Actual labor cost - Actual labor hours worked * Standard rate per hour
Labor rate variance = $45,816 - 6,640 * $6.50
Labor rate variance = $2,656 Unfavorable