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:

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.)

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:

Explanation / Answer

Material Price Variance

= (Actual price – standard price) x actual purchase

= ($0.31/micron - $0.35/micron) x 80000 microns

= $3200 F

Standard usage for actual production

= actual production x standard rate of usage of material

= 4600 toys x 7 microns / toy

= 32200 microns

Actual usage of materials = purchase – ending inventory = 80000 – 39750 = 40250 microns

Material Quantity Variance

= (actual usage – standard usage) x standard price

= (40250 microns – 32200 microns) x $0.35 /micron

= $2817.50 U

2)

Actual usage of labour hours = 5920 hours

Actual Labour rate = $46768 / 5920 hours = $7.90/hour

Labour rate variance

= (Actual labour rate – standard labour rate) x Actual usage of labour

= ( $7.90/hour - $7.40/hour) x 5920 hours

= $2960 U

Standard usage of labour

= actual production x standard labour hour per unit

= 4600 toys x 1.2 hours/toys

= 5520 hours

Labour efficiency variance

= (actual usage – standard usage) x standard rate

= (5920 hours – 5520 hours) x $7.40/hour

= $2960 U

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