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: 7 microns per toy at $0.31 per micron Direct labor: 1.4 hours per toy at $6.60 per hour During July, the company produced 4,600 Maze toys. The toy's production data for the month are as follows: Direct materials: 71,000 microns were purchased at a cost of $0.28 per micron. 30,750 of these microns were still in inventory at the end of the month. Direct labor: 7,040 direct labor-hours were worked at a cost of $49,280.

find the materials price and quantity variances.

find the labor rate and efficiency variances.

Answer 1

A. a.Materials price variance = $21300 Favorable

b. Materials usage/quantity variance = $2,496 Unfavorable

B. a Labor rate variance = $2,816 Unfavorable

b. Labor efficiency variance = 3,960 Unfavorable

Step-by-step explanation:

A. a.Materials price variance = (Actual price - Standard Price) × Actual Quantity

= ($0.28 - $0.31) × 71,000

= $0.03 × 71,000

= $21,300 Favorable

b. Materials usage/quantity variance = (Actual Quantity Used- Standard Quantity) × Standard Price

= ((71,000 - 30,750) - 7 × 4,600) × $0.31

= (40,250 - 32,200) × $0.31

= 8,050 × $0.31

= $2,496 Unfavorable

B. a Labor rate variance = (Actual Rate - Standard Rate) × Actual Hour

= ($49,280 ÷ 7,040 - $6.60) × 7,040

= $0.40 × 7,040

= $2,816 Unfavorable

b. Labor efficiency variance = (Actual Hour - Standard Hour) × Standard Rate

= (7,040 - 1.4 × 4,600) × $6.60

= 600 × $6.60

= 3,960 Unfavorable