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: 6 microns per toy at $0.33 per micron Direct labor: 1.2 hours per toy at $7.00 per hour During July, the company produced 5,300 Maze toys. Production data for the month on the toy follow: Direct materials: 76,000 microns were purchased at a cost of $0.29 per micron. 36,250 of these microns were still in inventory at the end of the month. Direct labor: 6,860 direct labor-hours were worked at a cost of $51,450. Required: 1. Compute the following 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). Do not round intermediate calculations. Round final answer to the nearest whole dollar.) a. The materials price and quantity variances. Material price variance Material quantity variance

Explanation / Answer

a) Material Price Variance = Actual Quantity X Actual Price -- Actual Quantity X Standard Price

Calculation of Actual Cost = 76000 X 0.33 = 25080

Calculation of Standard Cost = 36250 X 0.29 = 10513

Therefore the Material price variance is 25080 - 10513 = 14567

Material Quantity Variance = (Actual usage in units - Standard usage in units) x Standard cost per unit

= (76000 - 36250) X 0.29

= (39750 X 0.29)

= 11528.

b) Labour Rate Variance = (Actual rate - Standard rate) x Actual hours worked

Actual hours = 5300 units X 1.2

= 6360

Actual cost = Actual Hours x Actual Rate

= 6360 X 7.50 (51450/6860)

= 47700.

Standard Cost of actual hours = Actual Hours x Standard Rate

= 6360 X 7.00

= 44520.

(Actual rate - Standard rate) x Actual hours worked

(47700 - 44520) X 7.50

3180 X 7.50

$23850.

Direct Labor Effciency Variance:

Labor Efficiency Variance = Standard Cost of Actual Hours - Standard Cost

= 44520 - 47700

= $3180 Favourable

Related Questions

Navigate

• Browse (All)
• Browse D
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.