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 $0.30 per micron Direct labor: 1.2 hours per toy at $6.50 per hour During July, the company produced 4,800 Maze toys. Production data for the month on the toy follow: Direct materials: 75,000 microns were purchased at a cost of $0.27 per micron. 39,000 of these microns were still in inventory at the end of the month. Direct labor: 6,160 direct labor-hours were worked at a cost of $43,120. 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 unfavorable, and "None" for no effect (i.e., zero variance).) a. The materials price and quantity variances.

Explanation / Answer

Standard Quantity (SQ)

4800*6

28800

Standard Price (SP)

0.3

Actual Quantity(AQ)

75000-39000

36000

Actual Price(AP)

0.27

Material Price Variance = AQ *(SP - AP)

Material Price Variance = 36000 *(0.3 - 0.27)

Material Price Variance = 1080

Material Price Variance = 1080 F

Material Quantity Variance = SP* (SQ - AQ)

Material Quantity Variance = 0.3* (28800 - 36000)

Material Quantity Variance = -2160

Material Quantity Variance = 2160 U

Standard Quantity (SQ)

4800*6

28800

Standard Price (SP)

0.3

Actual Quantity(AQ)

75000-39000

36000

Actual Price(AP)

0.27

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