Question

Direct materials: 7 microns per toy at $0.34 per micron

Direct labor: 1.3 hours per toy at $6.70 per hour

During July, the company produced 4,800 Maze toys. The toy's production data for the month are as follows:

Direct materials: 73,000 microns were purchased at a cost of $0.31 per micron. 31,000 of these microns were still in inventory at the end of the month.

Direct labor: 6,640 direct labor-hours were worked at a cost of $46,480.

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

Answer a

Given:

Standard Price	$   0.34
Standard quantity	33,600	4800 * 7
Actual price	$   0.31
Actual Quantity	42,000	73000 - 31000

Now,

Material Price Variance =	(Standard Price - Actual price) * Actual Quantity
Material Price Variance =	( $ 0.34 - $ 0.31) * 73000
Material Price Variance =	$ 2190 Favorable

Also,

Material Quantity Variance =	(Standard quantity - Actual Quantity) * Standard Price
Material Quantity Variance =	(33600 - 42000) * $ 0.34
Material Quantity Variance =	$ 2,856 Unfavorable

Answer b

Given:

Standard Rate	$ 6.70
Standard hours	6,240	4800*1.3
Actual rate	$ 7.00	$ 46480 / 6640
Actual hours	6,640

Labor Rate Variance =	(Standard Rate - Actual Rate) * Actual hours
Labor Rate Variance =	( $ 6.7 - $ 7) * 6640
Labor Rate Variance =	$  1,992 Unfavorable

Labor Efficiency Variance =	(Standard hours - Actual hours) * Standard rate
Labor Efficiency Variance =	(6240 - 6640) * $ 6.7
Labor Efficiency Variance =	$ 2,680 Unfavorable

In case of any doubt or clarification, you're welcome to come back via comments.