Question

K&K 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 $0.32 per micron

Direct labor: 1.5 hours per toy at $6.80 per hour

During July, the company produced 5,300 Maze toys. The toy's production data for the month are as follows:

Direct materials: 79,000 microns were purchased at a cost of $0.30 per micron. 32,625 of these microns were still in inventory at the end of the month.

Direct labor: 8,450 direct labor-hours were worked at a cost of $61,685.

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.

k&k 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 1,075 hours each month to produce 2,150 sets of covers. The standard costs associated with this level of production are:

	Total		Per Set of Covers
Direct materials	$	54,825	$	25.50
Direct labor	$	10,750		5.00
Variable manufacturing overhead (based on direct labor-hours)	$	5,375		2.50
			$	33.00

During August, the factory worked only 800 direct labor-hours and produced 2,500 sets of covers. The following actual costs were recorded during the month:

	Total		Per Set of Covers
Direct materials (12,500 yards)	$	58,750	$	23.50
Direct labor	$	13,000		5.20
Variable manufacturing overhead	$	7,000		2.80
			$	31.50

At standard, each set of covers should require 3.0 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

	Standard Cost PU:
		Qty	Rate	Amt
	Direct Material	7.00	0.32	2.24
	Direct Labor	1.50	6.80	10.20
				12.44
	Standard Cost for 5300 Units:
		Qty	Rate	Amt
	Direct Material	37,100	0.32	11,872
	Direct Labor	7,950	6.80	54,060
	Total			65,932
	Actual Cost for 5300 Units:
		Qty	Rate	Amt
	Direct Material	46,375	0.30	13,913
	Direct Labor	8,450	7.30	61,685
	Total			75,598
	Direct Material Price Variance:				Direct Labor Price Variance:
	(Standard Price-Actual Price)Actual Qty Used				(Standard Price-Actual Price)Actual Hours Used
	(0.32-0.30)*46375				(6.80-7.30)*8450
	927.5	F			-4225	U
	Direct Material Usage Variance:				Direct Labor Usage Variance:
	(Standard Qty-Actual Qty)Standard Price				(Standard H-Actual H)Standard Price
	(37100-46375)*0.32				(7950-8450)*6.80
	-2968	U			-3400	U
	Please raise Separate Problem for Q2