Question

Dawson Toys, Limited, produces a toy called the Maze with the following standards:

Direct materials: 8 microns per toy at $0.33 per micron
Direct labor: 1.3 hours per toy at $6.90 per hour
During July, the company produced 4,900 Maze toys. The toy's production data for the month are as follows:
Direct materials: 73,000 microns were purchased at a cost of $0.30 per micron. 24,000 of these microns were still in inventory at the end of the month.
Direct labor: 6,770 direct labor-hours were worked at a cost of $51,452.
Compute the following variances for July:

The materials price and quantity variances.
The labor rate and efficiency variances.
a. Answer provided in the next response due to space constraints.

Answer 1

Material price variance is $2,190 favorable, and quantity variance is $3,234 unfavorable. Labor rate variance is $4,737 unfavorable, and efficiency variance is $2,760 unfavorable for Dawson Toys, Limited in July.

Step-by-step explanation:

The calculation of material and labor variances for Dawson Toys, Limited, involves determining the difference between the actual costs and the standards set by the company. In July, the company produces 4,900 Maze toys with specific standards for direct materials and direct labor.

Materials Price Variance

The materials price variance reflects the difference in cost between the standard cost of materials and the actual cost paid. The standard cost for direct materials is $0.33 per micron, but they were actually purchased at $0.30 per micron. With 73,000 microns purchased, the variance is calculated as follows:

(Standard Price - Actual Price) x Actual Quantity = (0.33 - 0.30) x 73,000 = $2,190 favorable

Materials Quantity Variance

The materials quantity variance reflects the difference between the standard quantity expected to be used and the actual amount used. The standard quantity needed for production is 8 microns per toy, resulting in expected usage of 39,200 microns for 4,900 toys. Since 24,000 microns are still in inventory, the actual usage was 49,000 microns, leading to:

(Standard Quantity - Actual Quantity) x Standard Price = (39,200 - 49,000) x 0.33 = -$3,234 unfavorable

Labor Rate Variance

The labor rate variance is the difference between the standard cost of labor and what was actually paid. The standard labor cost is $6.90 per hour, but the actual cost can be found by dividing the total labor cost by the hours worked:

Actual Rate per Hour = $51,452 / 6,770 hours = $7.60 per hour

(Standard Rate - Actual Rate) x Actual Hours = (6.90 - 7.60) x 6,770 = -$4,737 unfavorable

Labor Efficiency Variance

Finally, the labor efficiency variance calculates the difference between the standard hours expected to be worked and the actual hours worked. The standard hours for 4,900 toys are 6,370 hours (4,900 toys x 1.3 hours per toy). With 6,770 hours actually worked, the variance is:

(Standard Hours - Actual Hours) x Standard Rate = (6,370 - 6,770) x 6.90 = -$2,760 unfavorable