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 $0.33 per micron Direct labor: 1.2 hours per toy at $7.30 per hour During July, the company produced 5,300 Maze toys. The toy's production data for the month are as follows: Direct materials: 75,000 microns were purchased at a cost of $0.29 per micron. 28,625 of these microns were still in inventory at the end of the month. Direct labor: 6,760 direct labor-hours were worked at a cost of $52,052. 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. Do not round intermediate calculations. Round final answer to the nearest whole dollar amount.) a. The materials price and quantity variances. b. The labor rate and efficiency variances.

1a.	Material price variance
	Material quantity variance
1b.	Labor rate variance
	Labor efficiency variance

Answer 1

1a.

material price variance = ( actual price - standard price) X actual quantity purchased

=( .29 - .33 ) 75000 = $ 3000 F

Material quantity Variance = ( actual quantity consumed - standard quantity) X Standard price

= ( (75000 - 28625) - (7 X 5300) ) X .33 = $ 3061 U

1b.

labor . rate variance = ( actual rate per labor hour - standard rate per labor hour ) X actual hours

= ( actual rate X actual hours worked ) - ( standard rate X actual hours worked)

= 52052 - ( 7.3 X 6760) = $2704 U

labor efficiency variance = ( actual hours - standard hours ) X standard rate per hour

= ( 6760 - ( 1.2 X 5300 ) ) X 7.3 = $2920 U