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:

Direct materials: 8 microns per toy at $0.34 per micron
Direct labor: 1.2 hours per toy at $6.7 per hour

During July, the company produced 4,700 Maze toys. Production data for the month on the toy follow:

Direct materials:

78,000 microns were purchased at a cost of $0.31 per micron. 31,000 of these microns were still in inventory at the end of the month.
Direct labor: 6,040 direct labor-hours were worked at a cost of $44,696.

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. Round your answers to the nearest dollar amount. Omit the "$" sign in your response.)


Material price variance $2340 F
Material quantity variance $ ??? U

Requirement 2:

Compute the direct labor rate and efficiency 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.)


Labor rate variance $4228 U
Labor efficiency variance $2680 U

Explanation / Answer

Direct Material Variance (AQ x AP) - (AQ x SP) (79,000 x .32) - (79,000 x .34) = -1580 which is Favorable Direct Material Quantity Variance (AQ x SP) - (SQ x SP) (45,000 x .34) - (36,000 x .34) = 3,060 Unfavorable Direct Labor Rate Variance (AH x AR) - (AH x SR) (6700 x 7.9) - (6700 x 7.3) = 4,020 Unfavorable Direct Labor Efficiency Variance (6700 x 7.3) - (6300 x 7.3) = 2920 Unfavorable

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