Question

2.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: 1.2 hours per toy at $7.00 per hour

During July, the company produced 4,900 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. 30,000 of these microns were still in inventory at the end of the month.

Direct labor: 6,480 direct labor-hours were worked at a cost of $47,952.

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

	Dawson Toys Ltd
a)	Standard Quantity=(Actual production* micron required per unit)
	Actual Production=(A)	4900
	Direct material required per unit of production=(B)	8
	Standard Quantity=(A)*(B)	39200
	Actual material consumed=(Purchase of micron-Ending Inventory)=(79000-30000)	49000
	Material Price Variance=AQ*(AP-SP)=49000*(.30-.34)	$ -1,960.00	(F)
	Material Quantity Variance=SP*(AQ-SQ)=.34*(49000-39200)	$   3,332.00	(U)
b)	Standard labor hours=(Actual production*labor hour required per unit)=(4900*1.2)	5880
	Standard Rate	$           7.00
	Actual hours	6480
	Actual Rate=($47952/6480)	$           7.40
	Direct Labor Rate Variance=AH*(AR-SR)=6480*(7.4-7)	$   2,592.00	(U)
	Direct Labor Efficiency variance=SR*(AH-SH)=$7*(6480-5880)	$   4,200.00	(U)