Dawson Toys, Ltd., produces a toy called the Maze. The company has recently esta

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:

During July, the company produced 3,000 Maze toys. Production data for the month on the toy follow:

25,000 microns were purchased at a cost of $0.48 per micron. 5,000 of these microns were still in inventory at the end of the month.

Exercise 9-6 Requirement 1

Compute the direct materials price and quantity 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. Omit the "$" sign in your response.)

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:

Explanation / Answer

1. Material price variance: Given information; Actual price is $0.48 Standard price 0.50 Actual quantity 25,000 Given information; Actual price is $0.48 Standard price 0.50 Actual quantity 25,000 Material price variance can be calculated using the below formula; Material price variance = (Actual price - Standard price) Actual quantity = (0.48 - 0.50) 25,000 = (-0.02) 25,000 = -500 Favorable variance. 2. Material quantity variance: Actual quantity of material used (25,000 - 5,000) = 20,000 Standard quantity of material for the actual level of production (3,000 toys x 6 microns per toy) = 18,000 toys Standard price per unit of material = $0.50 Now the material quantity variance can be calculated as follows; Mateial quantity variance = (Actual quantity used - Standard quantity of material for actual level of production) Standard price = (20,000 - 18,000) $0.50 = (2,000) $0.50 = $1,000 Unfavorable variance. Actual quantity of material used (25,000 - 5,000) = 20,000 Standard quantity of material for the actual level of production (3,000 toys x 6 microns per toy) = 18,000 toys Standard price per unit of material = $0.50 Now the material quantity variance can be calculated as follows; Mateial quantity variance = (Actual quantity used - Standard quantity of material for actual level of production) Standard price = (20,000 - 18,000) $0.50 = (2,000) $0.50 = $1,000 Unfavorable variance.

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