Question

AA.) 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 $0.32 per micron

Direct labor: 1.2 hours per toy at $6.50 per hour

During July, the company produced 4,700 Maze toys. The toy's production data for the month are as follows:

Direct materials: 74,000 microns were purchased at a cost of $0.28 per micron. 38,750 of these microns were still in inventory at the end of the month.

Direct labor: 6,240 direct labor-hours were worked at a cost of $42,432.

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.

BB.)

Marvel Parts, Inc., manufactures auto accessories. One of the company’s products is a set of seat covers that can be adjusted to fit nearly any small car. The company has a standard cost system in use for all of its products. According to the standards that have been set for the seat covers, the factory should work 1,065 hours each month to produce 2,130 sets of covers. The standard costs associated with this level of production are:

	Total		Per Set of Covers
Direct materials	$	35,358	$	16.60
Direct labor	$	8,520		4.00
Variable manufacturing overhead (based on direct labor-hours)	$	3,195		1.50
			$	22.10

During August, the factory worked only 1,050 direct labor-hours and produced 2,700 sets of covers. The following actual costs were recorded during the month:

	Total		Per Set of Covers
Direct materials (6,000 yards)	$	43,740	$	16.20
Direct labor	$	11,340		4.20
Variable manufacturing overhead	$	5,670		2.10
			$	22.50

At standard, each set of covers should require 2.0 yards of material. All of the materials purchased during the month were used in production.

Required:

1. Compute the materials price and quantity variances for August.

2. Compute the labor rate and efficiency variances for August.

3. Compute the variable overhead rate and efficiency variances for August.

(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.)

Answer 1

1) Material price variance = (0.32-0.28)*74000 = 2960 F

Material quantity variance = (4700*6-35250)*.32 = 2256 U

Labour rate variance = (6.5*6240-42432) = 1872 U

Labour efficiency variance = (4700*1.2-6240)*6.5 = 3900 U

1) Material price variance = (8.3*6000)-43740 = 6060 F

Material quantity variance = (2700*2-6000)*8.3 = 4980 U

2) Labour rate variance = (8*1050)-11340 = 2940 U

Labour efficiency variance = (2700*.50-1050)*8 = 2400 F

3) Variable overhead rate variance = (3*1050-5670) = 2520 U

Variable overhead effciency variance = (1350-1050)*3 = 900 F