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 $0.34 per micron Direct labor: 1.2 hours per toy at $7.30 per hour During July, the company produced 4,700 Maze toys. Production data for the month on the toy follow Direct materials: 79,000 microns were purchased at a cost of $0.30 per micron. 43,750 of these microns Direct labor 5,940 direct labor-hours were worked at a cost of $45,144 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. Material price variance Material quantity variance b. The labor rate and efficiency variances. Labor rate variance Labor efficiency variance

Explanation / Answer

a)

b)

Material Price variance = Actual Quantity purchased* (Actual Price - Standard Price) Material Price variance = 79,000 * ($0.30 - $0.34) Material Price variance = $3,160 F Material Quantity variance = Standard Price * (Actual Quantity used - Standard Quantity) Material Quantity variance = $0.34 * ((79,000 - 43,750) - (4,700*6)) Material Quantity variance = $2,397 U

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