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 1.3 hours per toy at $7.40 per hour During July,the company produced 4,600 Maze toys. Production data for the month on the toy follow Direct materials: 71,000 microns were purchased at a cost of S0.31 per micron. 30,750 of these microns were still in inventory at the end of the month. Direct labor: 6,480 direct labor-hours were worked at a cost of $51,192 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). Do not round intermediate calculations. Round final answer to the nearest whole dollar.) 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 price - standard price] * actual quantity

= [0.31 - 0.34] * 71000 microns

= - $2130 favourable

Material quantity variance = [actual quantity - standard quantity] * standard price

= [ 40250 - (4600 * 7) ] * 0.34

= $2737 unfavourable.

b.

Labor rate variance = Actual hours (actual rate - standard rate)

= 6480 hours ($7.9 - $7.40)

= $3240 Unfavourable

Labor efficiency variance = Standard rate (actual hours - standard hours)

= $7.40 [6480 hours - (4600 * 1.3)]

= $3700 Unfavourable.

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