Question

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.

Answer 1

• Requirement asked: Requirement 1 Part [a]

Material Price Variance

Material Price Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Quantity PURCHASED
(	$                               0.34	-	$                       0.30	)	x	79000
	3160
	Variance		$              3,160.00			Favourable-F

OR

Material Price Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Quantity USED = 79000 - 30000
(	$                               0.34	-	$                       0.30	)	x	49000
	1960
	Variance		$              1,960.00			Favourable-F

Material Quantity variance

Material Quantity Variance
(	Standard Quantity = 4900 units x 8 microns	-	Actual Quantity used	)	x	Standard Rate
(	39200	-	49000	)	x	$                           0.34
	-3332
	Variance		$              3,332.00			Unfavourable-U