Exercise 10-8 Direct Materials and Direct Labor Variances [LO10-1, LO10-2] L010-
ID: 2453992 • Letter: E
Question
Exercise 10-8 Direct Materials and Direct Labor Variances [LO10-1, LO10-2] L010-1, L010-21 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 labor: 1.4 hours per toy at $7.10 per hour During July, the company produced 5,400 Maze toys. Production data for the month on the toy follow: Direct materials: 76,000 microns were purchased at a cost of S0.30 per micron. 35,500 of these microns were still in inventory at the end of the month. Direct labor: 7,860 direct labor-hours were worked at a cost of $60,522. 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 no 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 varianceExplanation / Answer
SOLUTION :
Direct material
QTY
RATE
AMOUNT
STANDARD
32400
0.32
10368
ACTUAL
40500
0.3
12150
DIRECT LABOUR
Hours
RATE
AMOUNT
STANDARD
7560
7.1
53676
ACTUAL
7860
7.7
60522
MATERIAL QTY VARIANCE
(SQ-AQ)XSR
(32400-40500)X.32
-2592
U
MATERIAL PRICE VARIANCE
(SR-AR)XAQ
(.32-.3)X40500
810
F
LABOR EFFICIANCY VARIANCE
(SH-AH)XSR
(7560-7860)X7.1
-2130
U
LABOR RATE VARIANCE
(SR-AR)XAH
(7.1 - 7.7)X7860
-4716
U
SQ/H
STANDARD QTY/HOURS
AQ/H
ACTUAL QTY/HOURS
SR
STANDARD RATE
AR
ACTUAL RATE
Direct material
QTY
RATE
AMOUNT
STANDARD
32400
0.32
10368
ACTUAL
40500
0.3
12150
DIRECT LABOUR
Hours
RATE
AMOUNT
STANDARD
7560
7.1
53676
ACTUAL
7860
7.7
60522
MATERIAL QTY VARIANCE
(SQ-AQ)XSR
(32400-40500)X.32
-2592
U
MATERIAL PRICE VARIANCE
(SR-AR)XAQ
(.32-.3)X40500
810
F
LABOR EFFICIANCY VARIANCE
(SH-AH)XSR
(7560-7860)X7.1
-2130
U
LABOR RATE VARIANCE
(SR-AR)XAH
(7.1 - 7.7)X7860
-4716
U
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