Dawson Toys, Ltd, produces a toy called the Maze. The company has recently estab

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 $0.31 per micron Direct labor: 1.5 hours per toy at $6.80 per hour During July, the company produced 4,600 Maze toys. Production data for the month on the toy follow Direct materials: 79,000 microns were purchased at a cost of $0.28 per micron. 38,750 of these microns were still in inventory at the end of the month. Direct labor: 7,400 direct labor-hours were worked at a cost of $55,500. 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

Direct Material Price Variance = (Standard Rate - Actual Rate) x Actual Quantity Purchased                                                              = ( 0.31 - 0.28) x 79000                                                              = 2370 Fav Direct Material Quantity Variance = (Standard Quantity - Actual Quantity) x Standard Rate                                                              = ( 7 x 4600 - 40250) x 0.31                                                              = 2496 Unfav Direct Labor Rate Variance = (Standard Rate - Actual Rate) x Actual Hours                                                        = [6.80 - 7.50] x 7400                                                              = 5180 Unfav Actual labor Price Per hour = Total Cost / total hours                                                                  = 55500 / 7400                                                                  = 7.50 per hour Direct Labor Efficiency Variance = (Standard Hours- Actual Hours) x Standard Rate                                                              = [1.5 x 4600 - 7400] x 6.80                                                              = 3400 Unfav

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