Dawson Toys, Ltd., produces a toy called the Maze. The company has recently esta
ID: 2588597 • Letter: D
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 $1.50 per micron Direct labor: 1.3 hours per toy at $21 per hour During July, the company produced 3,000 Maze toys. The toy's production data for the month are as follows: Direct materials: 25,000 microns were purchased at a cost of $1.48 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 $88,000. 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). Input all amounts as positive values.) a. The materials price and quantity variances. b. The labor rate and efficiency variances.
Explanation / Answer
Direct Material Price Variance = (Standard Rate - Actual Rate) x Actual Quantity Used = ( 1.50 - 1.48) x 20000 = 400 Fav Direct Material Quantity Variance = (Standard Quantity - Actual Quantity) x Standard Rate = ( 6 x 3000 - 20000) x 1.50 = 3000 Unfav Direct Labor Rate Variance = (Standard Rate - Actual Rate) x Actual Hours = [21 - 22] x 4000 = 4000 Unfav Actual labor Price Per hour = Total Cost / total hours = 88000 / 4000 = 22 per hour Direct Labor Efficiency Variance = (Standard Hours- Actual Hours) x Standard Rate = [3000 x 1.3 - 4000] x 21 = 2100 Unfav
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