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 heip 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: 1.4 hours per toy at $6.60 per hour During July, the company produced 4,500 Maze toys. Production data for the month on the toy follow Direc n wera si oo microns were ours28 per micron. 36.625 of these microns were still in inventory at the end of the month. Direct labor: 6,600 direct labor-hours were worked at a cost of $47,520 Required 1. Compute the following variances for July: (Do not round intermediate calculations. Round final answer to the nearest whole dollar. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).) a. The materials price and quantity variances. Material price variance Material quantity vanance b. The labor rate and efficiency variances Labor rate variance Labor efficency

Explanation / Answer

1) a. Material Price Variance $         1,181 F Material Quantity Variance $         2,441 U Working: Material Price Variance = (Standard Price - Actual Price)*Actual Quantity = (0.31-0.28)*39375 = $   1,181.25 Actual Quantity of Materials used = Materials Purchased - Materials in Ending Inventory =           76,000 -        36,625 =           39,375 Material Quantity Variance = (Standard Quantity-Actual Quantity)*Standard Price = (31500-39375)*0.31 = $ -2,441.25 Standard Quantity = Actual Production x Standard quantity per unit = 4500 x 7 =           31,500 b. Labor rate variance $         3,960 U Labor efficiency variance $         1,980 U Working: Labor rate variance = (Standard Labor rate - Actual Labor rate)*Actual Labor hours = (6.60-7.20)*6600 = $ -3,960.00 Actual labor rate = Actual Labor cost/Actual Labour hours = $       47,520 / 6600 = $            7.20 Labor efficiency variance = (Standard labor hours-Actual Labor hours)*Standard Labor rate = (6300-6600)*6.60 = $        -1,980 Standard Labor hours = Actual production x Standard labor hours =              4,500 x 1.4 =              6,300

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