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 $0.33 per micron
Direct labor: 1.4 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: 74,000 microns were purchased at a cost of $0.31 per micron. 24,000 of these microns were still in inventory at the end of the month.
Direct labor: 7,400 direct labor-hours were worked at a cost of $54,760.
1. Compute the following variance for july

a The materials price and quantity variances

b. The labor rate and efficiency variances

Answer 1

Materials price variance = 1000 Favorable

Material Quantity Variance= 3300 unfavorable

2-a) Direct Labor Rate variance =3700 Unfavorable

Direct labor time variance=2760 Unfav

Step-by-step explanation:

Given

Standard Quantity: Direct materials: 8 microns per toy

Standard Price $0.33 per micron

Standard hours :Direct labor: 1.4 hours per toy

Standard rate $6.90 per hour

Actual Production 5,000 Maze toys.

Working

Actual Quantity Purchased: Direct materials: 74,000 microns

Actual Price $0.31 per micron.

Actual Quantity used =74,000 microns- 24,000 = 50,000 microns

Standard Quantity Allowed = 8 * 5000= 40,000 microns

Actual hours: Direct labor: 7,400 direct labor-hours

Standard Hours allowed= 5000 units * 1.4= 7000 labor hours

Actual rate = $54,760/7400=$ 7.4 per hour

Calculations

1-a) Materials price variance = (Actual Price - Standard Price )* Actual Quantity

Materials price variance = (0.31- 0.33)50,000= 1000 Favorable

Material Quantity Variance= (Standard Price) *( Actual Quantity- Standard Quantity)

Material Quantity Variance=(0.33) - (50,000- 40,000) = 0.33*10,000= 3300 unfavorable

2-a) Direct Labor Rate variance= (actual hours)* actual rate- standard rate

= 7,400 (7.4-6.9)= 7400*0.5= 3700 Unfavorable

Direct labor time variance=standard rate* (actual hours )- (standard hours )

= 6.9 ( 7400- 7000) = 6.9 * 400= 2760 Unfav