P Save & E Che produces a toy called the Maze. The company has recently establis
ID: 2524123 • Letter: P
Question
P Save & E Che 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: 7 microns per toy at $0.34 per micron Direct labor: 1.5 hours per toy at $700 per hour During July, the company produced 4,900 Maze toys. The toy's production data for the month are as follows: Direct materials. 78,000 microns were purchased at a cost of $0.30 per micron. 35,125 of these microns were still in inventory at the end of the month. Direct labor. 7,950 direct labor-hours were worked at a cost of $60,420 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). Input all amounts as positive values. Do not round intermediate calculations. final answer to the nearest whole dollar amount.) a. The materials price and quantity variances. b. The labor rate and efficiency variances. a Material price variance Material quantity variance 1b Labor rate variance Labor efficiency variance K Prex 3 of 17 NextExplanation / Answer
Answer
1.a
Material price variance :
= (standard unit price - actual price per unit )*actual quantity
=(0.34-0.30)*78000
=3120 Favourable
Material quantity variance:
=(Actual usage in units - Standard usage in units) x Standard cost per unit
=[(4900*7) - (78000-35125)] *0.34
=(34300 - 42875)*0.34
=2915.50 Unfavourable
1.b.
labor rate variances:
=(Standard rate - Actual rate) x Actual hours worked
=[7 -(60420/7950)]*7950
=4770 Unfavourable
labor efficiency variances:
(Standard hours - Actual hours) x Standard rate
=[(4900*1.5) - 7950]*7
=(7350-7950)*7
=4200 Unfavourable
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