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:7 miarons per toy at $0.35 per micron Direct labor: 1.1 hours per toy at $7.00 per hour During July, the company produced 5,100 Maze toys. Production data for the month on the toy follow Direct materials: 75,000 microns were purchased at a cost of $0.32 per micron. 30,375 of these microns were stil in inventory at the end of the month. Direct labor: 6,110 direct labor-hours were worked at a cost of $46,436. 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 unfavorablo, and "None" for no offect (i.o., zero variance)) a. The materials price and quantity variances. Material price variance Material quantity variance b. The labor rate and efficiency variances. Labor rate variance Labor efficiency variance

Explanation / Answer

a.

Material price variance = Actual quantity purchased * (Actual price - Standard price)

= 75,000 * (0.32 - 0.35)

= 2,250 Favourable

Material quantity variance = (Actual quantity used - Standard quantity) * Standard price

= [(75,000-30,375) - (5,100*7)] * 0.35

= (44,625 - 35,700) * 0.35

= 3,124 Unfavourable

2.

Labour rate variance = Actual hours * (Actual rate - Standard rate)

= 6,110 * [(46,436/6,110) - 7]

= 6,110 * 0.6

= 3,666 Unfavourable

Labour efficiency variance = Standard rate * (Actual hours - Standard hours)

= 7 * [6,110 - (5,100*1.1)]

= 7 * 500

= 3,500 Unfavourable

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