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 $0.32 per micron Direct labor: 1.2 hours per toy at $6.50 per hour During July, the company produced 5,100 Maze toys. The toy's production data for the month are as follows: Direct materials: 78,000 microns were purchased at a cost of $0.28 per micron. 27,000 of these microns were still in inventory at the end of the month. Direct labor: 6,620 direct labor-hours were worked at a cost of $46,340.

Compute the direct materials price and quantity variances for July. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effectCompute the direct labor rate and efficiency variances for July. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect

1.-3,120 Favorable variance.

2.$704Unfavorable variance

Explanation:

Material price variance:

Actual price is $0.28

Standard price 0.32

Actual quantity 78,000

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

(0.28 - 0.32)*78,000

= (-0.04) 78,000= -3,120 Favorable variance.

2. Material quantity variance:

Actual quantity of material used (78,000 - 27,000) = 51,000

Standard quantity of material for the actual level of production (5,100 toys x 8 microns per toy) =48,800 toys

Standard price per unit of material = $0.32

Material quantity variance = (Actual quantity used - Standard quantity of material for actual level of production) Standard price

= (51,000 - 48,800)* $0.32

= (2,200) $0.32 = $704Unfavorable variance

Explanation:

Std material Qty allowed (5100*8) = 40800    

Std price: 0.32      

Actual qty purchased: 78000    

Actual qty used: 78000-27000 =51000    

Actual price = 0.28      

Material price variance= Actual Qty (Std price -Actual price)  

78000 (0.32- 0.28) = 3120 fav  

Material Qty variance= Std price (Std qty-Actual Qty )  

0.32 (40800-51000) = 3264 Unfav  

Std labor hours (5100*1.2) = 6120 Hours    

Std rate per hour: 6.50    

Actual Labor hours: 6620 hours    

Actual labor cost = 46340

labor rate variance = Actual hours *Std rate-Actual labor cost  

6620 *6.50 - 46340 = 3310 Unfav  

Labor efficiency variance = Std price (Std hours -Actual hours )  

6.50 (6120-6620 ) = 3250 Unfav

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