1. Topper Toys has developed a new toy called the Brainbuster. The company has a

Question

1. 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: 8 pieces per toy at $0.30 per piece
Direct labor: 1.2 hours per toy at $7 per hour

During the month of August, the company produced 5,000 Brainbuster toys. Production data for the month on the toy follow:

Direct materials: 50,000 pieces were purchased for use in production at a cost of $0.28 per piece.
Direct labor: 6,400 direct labor-hours were worked at a cost of $48,000.

Required:
1. Compute the following variances for the month
a. Direct materials price and quantity variances.
b. Direct labor price and quantity variances.

Explanation / Answer

a. Materials price variance = (Actual quantity purchased × Actual price) - (Actual quantity purchased × Standard price) =50,000 *($0.28-$0.30) = -1000 Materials quantity variance = (Actual quantity used × Standard price) - (Standard quantity allowed × Standard price) = 50,000*$0.30 -5,000*8*$0.30 =3000 b.Labor rate variance = (Actual hours worked × Actual rate) - (Actual hours worked × Standard rate) labor price variances = 6,400*($48,000/6,400 - $7) = 3200 Labor efficiency variance = (Actual hours worked × Standard rate) - (Standard hours allowed × Standard rate) = 6,400*$7 - 5,000*1.2*$7 =2800

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