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: 1.1 hours per toy at $6.70 per hour During July, the company produced 5,400 Maze toys. The toy's production data for the month are as follows Direct materials: 80,000 microns were purchased at a cost of $0.30 per micron. 39,500 of these microns were still in inventory at the end of the month. Direct labor. 6,540 direct labor-hours were worked at a cost of $45,780 Required: 1. Compute the following variances for July: (ndicate 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. Do not round intermediate calculations. Round final answer to the nearest whole dollar amount.) a. The materials price and quantity variances b. The labor rate and efficiency variances. 1a. Material price variance Material quantity variance b. Labor rate variance Labor efficiency variance

Explanation / Answer

Answer for a)

Material price variance:

(STD. Price-actual price)×actual quantity

=($0.33-$0.30)×(80000 microns-39500 microns)

=$1215 favourable

Material quantity variance:

(STD. Quantity-actual quantity)×std. Price

=((5400 toys×6microns)-40500 microns)×$0.33

=$2673 unfavorable

Answer for b)

Labour rate variance:

(STD. Rate - actual rate)×actual hours

($6.7-($45780/6540hours))×6540 hours

$1962 unfavorable

Labour efficiency variance:

(STD.hours-actual hours)×std.rate

((5400 toys×1.1 hours)-6540 hours)×$6.7

$4020 unfavorable.

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