Exercise 10-8 Direct Materials and Direct Labor Variances [LO10-1, LO10-2] Dawso

Question

Exercise 10-8 Direct Materials and Direct Labor Variances [LO10-1, LO10-2] 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: 6 microns per toy at $0.32 per micron Direct labor: 1.4 hours per toy at $6.70 per hour During July, the company produced 4,800 Maze toys. Production data for the month on the toy follow Direct materials: 77,000 microns were purchased at a cost of $0.30 per micron. 41,000 of these microns were still in inventory at the end of the month Direct labor 7,220 direct labor-hours were worked at a cost of $51,984. 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 do effect (i.e., zero variance). Do not round intermediate calculations. Round final answer to the nearest whole dollar.) a. The materials price and quantity variances Material price variance Material quantity variance

Explanation / Answer

Particulars Standard Actual Qty Rate amount Qty Rate amount Materials      28,800.00           0.32            9,216.00      77,000.00            0.30          23,100.00 Labour        6,720.00      6.7000          45,024.00        7,220.00            7.20          51,984.00 Actual output        4,800.00 Materials reqd(4800*6)      28,800.00 Labour hrs reqd(4800*1.4)        6,720.00 DMPV = (SP-AP)*AQ DMPV = (.32 - .30)77000 DMPV = 1540 F DMQV= (SQ-AQ)SP DMQV= (28800-36000).32 DMQV= 2304 U DLRV= (SR-AR)AH DLRV= (6.70-7.2)7220 DLRV= 3610 U DLEV = (SH-AH)SR DLEV = (6720-7220)6.7 DLEV = 3350 U

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