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: 8 microns per toy at $0.34 per micron

Direct labor: 1.3 hours per toy at $6.80 per hour

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

Direct materials: 73,000 microns were purchased at a cost of $0.30 per micron. 26,000 of these microns were still in inventory at the end of the month.

Direct labor: 6,410 direct labor-hours were worked at a cost of $46,793.

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.

Answer 1

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Standard Material Price		$ 0.34		Standard Hour Rate		$ 6.80
Standard Quantity	Toys 4700*8 Microns	37600		Standard Hour	Toys 4700*1.3 Hour	6110
Actual Quantity	73000-26000	47000		Actual Hours		6410
Actual Matrial Price		$ 0.30		Actual Hour Rate	46793/6410	$ 7.30
Material Price Variance	AQ(AP-SP)			Labor Rate Variance	AH(AR-SR)
	47000*(0.3-0.34)				6410*(7.30-6.8)
	1880 Favorable				3205 Unfavorable
Material Quantity Variance	SP(AQ-SQ)			Labor Efficiency Variance	SR(AH-SH)
	0.34*(47000-37600)				6.8*(6410-6110)
	3196 Unfavorable				2040 Unfavorable