Question

Accounting

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: 7 microns per toy at $0.34 per micron

Direct labor: 1.3 hours per toy at $6.90 per hour

During July, the company produced 5,500 Maze toys. The toy's production data for the month are as follows:

Direct materials: 76,000 microns were purchased at a cost of $0.32 per micron. 27,875 of these microns were still in inventory at the end of the month.

Direct labor: 7,650 direct labor-hours were worked at a cost of $55,080.

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

a

Direct material variances
Particulars	Amount
Standard price per unit of raw material	$                  0.34
Less: actual price per unit of raw material	$                  0.32
Price variance per unit of raw material	$                  0.02
× units of raw materials purchased	76,000
Direct material price variance	$                1,520
Particulars	Per one unit of output	× actual output	Total
Standard raw materials units required per unit of output	7.00	5,500.00	38,500.00
Less: actual raw materials units used	8.75	5,500.00	48,125.00
Difference in raw materia units used			(9,625.00)
× standard price per unit of raw material			$                  0.34
Direct material quantity variance	-		$        (3,272.50)
Summary
Particulars	Amount	Nature
Materials quanity variance	$         (3,272.50)	Unfavorable
Materials price variance	$           1,520.00	Favorable

b

Direct labor variances
Particulars	Amount
Standard rate per direct labor hour	$                    6.90
Less: actual rate per direct labor hour	$                    7.20
Rate variance per diret labor hour	$                  (0.30)
× direct labor hours worked	7,650
Direct labor rate variance	$          (2,295.00)
Particulars	Hours per unit	× actual output	Total
Standard direct labor hours required for actual output	1.30	5,500	7,150.00
Less: actual direct labor hours worked for actual output	1.39	5,500.00	7,650.00
Difference in direct labor hours			(500.00)
× standard rate per hour of direct labor hour			$               6.90
Direct labor efficiency variance	-		$     (3,450.00)
Summary
Particulars	Amount	Nature
Direct labor efficiency variance	$           (3,450.00)	Unfavorable
Direct labor rate variance	$           (2,295.00)	Unfavorable

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