Question

Dawson's Toys, LTD., produces a toy called the Maze. The company has recently restablished 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 $1.50 per micron

Direct labor: 1.3 hours per toy at $21 per hour

During July, the company produced 3,000 Maze toys. The toy's production data for the month are as follows:

Direct Materials: 25,000 microns were purchased at a cost of $1.48 per micron. 5,000 of these microns were still inventory at the end of the month.

Direct labor: 4,000 direct labor-hours were worked at a cost of $88,000.

Required:

Compute the following variances for July( Indicate the effect of each variance by selecting "F" for favorable or "U" for unfavorable and "none" for no effect INput all amounts as positive values)

Calculate:

1 Materials price variance

2 Material quantity variance

3 Labor rate variance

4 Labor efficiency variance

Could someone please help me with this problem? Please be as clear as possible about the calculations. Thank you!

Answer 1

1) Material price variance = (Standard price-actual price)actual quantity

= (1.50-1.48)*25000

Material price variance = 500 F

2) Material quantity variance = (Standard quantity-actual quantity)Standard rate

= (3000*6-20000)*1.50

Material quantity variance = 3000 U

3) Labour rate variance = (Standard rate-actual rate) actual hours

= (21*4000-88000)

Labour rate variance = 4000 U

4) Labour efficiency variance = (Standard hour-actual hour)Standard rate

= (3000*1.3-4000)*21

Labour efficiency variance = 2100 U