Question

Dawson Toys, Ltd., produces a toy called the Maze. The company has recently created 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 $0.32 per micron

Direct labor: 1.1 hours per toy at $7.00 per hour

During July, the company produced 5,100 Maze toys. The toy's production data for the month are as follows:

Direct materials: 75,000 microns were purchased at a cost of $0.30 per micron. 36,750 of these microns were still in inventory at the end of the month.

Direct labor: 6,010 direct labor-hours were worked at a cost of $44,474.

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 answers to the nearest whole dollar amount.)

a. The materials price and quantity variances.

b. The labor rate and efficiency variances.

Answer 1

	a	The materials price and quantity variances.
	SP	Standard price of Material	$0.32	per micron
	SQ	Standard quantity of Material required	30,600	micron	(6*5100)
	AP	Actual price of Material	$0.30	per micron
	AQ	Actual quantity of Material used	38,250	micron	(75000-36750)
	MPV=AQ(AP-SP)	Material Price Variance	$765.00	F	(actual Price is lower than standard price)
	MQV=SP(AQ-SQ)	Material Quantity Variance	$2,448	U	(actual Quantity is higher than standard quantity)
	MPV+MQV	Material Cost variance	$1,683	U
	(AP*AQ)-(SP*SQ)	Material Cost variance	$1,683	U
	b	The Labor rate and efficiency variances.
	SR	Standard Rate of labor per hour	$7.00
	SH	Standard hour of labor required	5,610	(1.1*5100)
	AR	Actual rate of labor per hour	$7.40	(44474/6010)
	AH	Actual labor hours used	6,010
	LRV=AH(AR-SR)	Labor Rate Variance	$2,404	U	(actual Rate is higher than standard rate)
	LEV=SR(AH-SH)	Labor Efficiency   Variance	$2,800	U	(actual hour   is higher than standard hour)
	LRVV+LEV	Labor Cost variance	$5,204	U
	(AR*AH)-(SR*SH)	Labor Cost variance	$5,204	U