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 microns per toy at $0.34 per micron Direct labor: 1.4 hours per toy at $700 per hour During July, the company produced 5,300 Maze toys. The toy's production data for the month are as follows: Direct materials. 74,000 microns were purchased at a cost of $0.31 per micron. 27625 of these microns were still in inventory at the end of the month. Direct labor: 8,020 direct labor-hours were worked at a cost of $58,546. 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). Input all amounts as positive values. Do not round intermediate calculations. Roand 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 1-a.

Actual Direct materials purchased = 74,000 microns
Actual Direct materials used = 46,375 microns (74,000 - 27,625)
Standard Price = $0.34 per micron
Actual price = $0.31 per micron
Number of toys produced = 5,300

Standard direct materials = 5,300 * 7
Standard direct materials = 37,100

Material Price Variance = Actual materials purchased * (Actual price - Standard price)
Material Price Variance = 74,000 * ($0.31 - $0.34)
Material Price Variance = $2,220 Favorable

Materials Quantity Variance = Standard Price * (Actual materials used - Standard materials)
Materials Quantity Variance = $0.34 * (46,375 - 37,100)
Materials Quantity Variance = $3,154 Unfavorable

Answer 1-b.

Actual hours = 8,020
Standard rate = $7.00 per hour
Actual labor cost = $58,546

Actual rate = $58,546 / 8,020
Actual rate = $7.30 per hour

Standard hours = 1.40 hour * 5,300 toy
Standard hours = 7,420 hours

Labor Rate Variance = Actual hour * (Actual rate - Standard rate)
Labor Rate Variance = 8,020 * ($7.30 - $7.00)
Labor Rate Variance = $2,406 Unfavorable

Labor Efficiency Variance = Standard Rate * (Actual hour - Standard hour)
Labor Efficiency Variance = $7.00 * (8,020 - 7,420)
Labor Efficiency Variance = $4,200 Unfavorable

Related Questions

Navigate

• Browse (All)
• Browse D
• Subjects

---

---

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