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. The materials price variance is NOT 672 or 840. Please help me find the correct answer.

Explanation / Answer

Answer:

Material Price Variance is the variance between standatd price and actual price at the actual quantity purchased.

In this variance, actual quantity of material purchased is considered.

Material Price Variance = Actual quantity purchased (std price - actual price)

= 80,000 ($0.31 - 0.29)

= $1,600 Favorable

Favorable becoz actual price is less than standard price..

Material Usage Variance is the difference between standard quantity and actual quantity used during the period at standard cost.

Here we need to find out standard quantity for actual production = actual production x std quantity per jnit = 4800 × 7 micron per toy = 33,600 micron

Acutal qiantity used = Purchased quantity - Ending Inventory = 80,000 - 38,000 = 42,000 micron

Material usage variance = std price (std quantity used for actual production - actual usage)

= $0.31 (33,600 - 42,000)

= $2,604 unfavorable

Unfavorable because actual usage is higher than std usage..

Related Questions

Navigate

• Browse (All)
• Browse D
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.