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 $0.50 per micron Direct labor: 1.3 hours per toy at $8 per hour During July, the company produced 3,000 Maze toys. Production data for the month on the toy follow Direct materials: 25,000 microns were purchased at a cost of $0.48 per micron. 5,000 of these microns were still in inventory at the end of the month Direct labor: 4,000 direct labor-hours were worked at a cost of $36,000 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).) 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

1a Material price variance = 25000*(0.48-0.5)= 500 F Material quantity variance=0.5*(20000-3000*6)= 1000 U b Labor rate variance = 36000-(4000*8)= 4000 U Labor efficiency variance=8*(4000-3000*1.3)= 800 U

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