Topper Toys has developed a new toy called the Brainbuster. The company has a st
ID: 2496856 • Letter: T
Question
Topper Toys has developed a new toy called the Brainbuster. The company has a standard cost system to help control costs and has established the following standards for the Brainbuster toy:
Direct materials: 7 diodes per toy at $0.34 per diode
Direct labor: 1.3 hours per toy at $7.20 per hour
During August, the company produced 4,500 Brainbuster toys. Production data on the toy for August follow:
Direct materials: 77,000 diodes were purchased at a cost of $0.32 per diode. 37,625 of these diodes were still in inventory at the end of the month.
Direct labor: 6,350 direct labor-hours were worked at a cost of $48,895.
1Compute the following variances for August (Do not round your per unit rates, round other intermediate calculations and your final answer to nearest whole dollar. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).):
a.Direct materials price and quantity variances.
Material price variance F or U
Material quantity variance F or U
b.Direct labor rate and efficiency variances.
Labor rate variance F or U
Labor efficiency variance F or U
Explanation / Answer
a)Actual quantity used = 77000-37625 = 39375
Material price variance = AQ(AP -SP)
= 39375 (.32 -.34)
= 39375 * -.02
= 787.5 (F)
Material quantity variance = SR (AQ-SQ)
= .34 [39375 - (4500*7) ]
= .34 [ 39375 - 31500]
= .34 * 7875
= $ 2677.5 (U)
B)labor price variance= AH *AR - AH *SR
= 48895 - (6350 *7.2 )
= 48895 - 45720
= 3175 (U)
Labor efficiency variance = SR *AH - SR *SH
= 7.2 * 6350 - 7.2 *(1.3 * 4500)
= 45720- 42120
= 3600 (U)
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