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 $0.32 per micron Direct labor: 1.2 hours per toy at $6.90 per hour During July, the company produced 5,500 Maze toys. Production data for the month on the toy follow: Direct materials: 78,000 microns were purchased at a cost of $0.28 per micron. 23,000 of these microns were still in inventory at the end of the month. Direct labor: 7,100 direct labor-hours were worked at a cost of $53,250. Find material price and quantity variance, and labor rate variance and labor efficiency variance

Explanation / Answer

1) Materials price variance = (Actual price - Standard Price) *Actual Quantity

Materials price variance = (0.28-0.32)*78000

Materials price variance = $ 3120 Favorable

2). Materials usage/quantity variance = (Actual Quantity Used- Standard Quantity)Standard Price

Materials usage/quantity variance = ((78000-23000) - 8*5500)*0.32

Materials usage/quantity variance = $ 3520 Unfavorable

3) Labor rate variance = (Actual Rate-Standard Rate)*Actual Hour

Labor rate variance = (53250/7100-6.90)*7100

Labor rate variance = $ 4260 Unfavorable

4) Labor efficiency variance = (Actual Hour-Standard Hour )Standard Rate

Labor efficiency variance = (7100-5500*1.2)*6.90

Labor efficiency variance = 3450 Unfavorable

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