Dawson Toys Ltd produces a toy called the Maze The company h

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 $0.35 per micron Direct labor: 1.1 hours per toy at $6.90 per hour During July, the company produced 5,000 Maze toys. Production data for the month on the toy follow: Direct materials: 73,000 microns were purchased at a cost of $0.32 per micron. 23,000 of these microns were still in inventory at the end of the month. Direct labor: 6,100 direct labor-hours were worked at a cost of $44,530. 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). Do not round intermediate calculations. Round final answer to the nearest whole dollar.)

The materials price and quantity variances.

The labor rate and efficiency variances.

Solution

a)

Material price variance = (Standard price - Actual price)*Actual quantiy

= ($0.35 per micron - $0.32per micron)*73,000 - 23,000 microns

= $0.03*50,000 microns

= $1,500 Favorable

Material quantity variance = (Standard quantity - Actual quantity)*Standard price

= [(8 microns * 5,000 toys) - 50,000 microns]*$0.35 per micron

= (40,000 microns - $50,000 microns)*$0.35 per micron

= 10,000 microns * $0.35 per micron

= 3,500 Unfavorable

b)

Labor rate variance = (Standard rate - Actual rate)*Actual hours

= [$6.90 - ($44,530/6,100 hours)*6,100 direct laboe hours

= ($6.90 - $7.30 per per hour)* 6,100 direct laboe hours

= $0.4* 6,100

= $2,440 Unfavorable

Labor efficiency variance = (Standard hours - Actual hours)*Standard rate

= [(1.1 hours*5,000 toys) - 6,100 hours]*$6.90 per hour

= (5,500 hours - 6,100 hours)*$6.90 per hour

= 600 hours *$6.90 per hoour

= $4,140 unfavorable