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 $0.31 per micron

Direct labor: 1.4 hours per toy at $7.50 per hour

During July, the company produced 4,800 Maze toys. Production data for the month on the toy follow:

Direct materials: 80,000 microns were purchased at a cost of $0.29 per micron. 38,000 of these microns were still in inventory at the end of the month.

Direct labor: 7,220 direct labor-hours were worked at a cost of $57,760.

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.

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:

Explanation / Answer

Solution.

Calculation for materials price and quantity variances..

SQ = 4,800 Maze toys. x 7 microns per toy = 33,600

AQ = 80,000 - 38,000 = 42,000 Microns

SP = $0.31 per micron

AP = $0.29 per micron.

1. Materials quantity variances.

Formula = DM Quantity Variance = ( SQ AQ ) × SP.

= (33,600 - 42,000 ) x $0.31 = $2,604 U

2. Materials price variances.

Formula =

Direct Material Price Variance: = Actual Quantity x Actual Price - Actual Quantity x Standard Price

= ( 33,600 - 0.29 ) - ( 33,600 x 0.31 )

= $9,744 - $10,416 = $672 F

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