Exercise 10-8 Direct Materials and Direct Labor Variances [LO10-1, LO10-2 Dawson
ID: 2556552 • Letter: E
Question
Exercise 10-8 Direct Materials and Direct Labor Variances [LO10-1, LO10-2 Dawson Toys, Ltd., produces a toy cal led 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 $O 33 per micron Direct labor: 1.4 hours per toy at $710 per hour During July, the company produced 5,300 Maze toys. The toy's production data for the month are as follows Direct materials: 79,000 microns were purchased at a cost of $0.32 per micron. 39,250 of these microns were still In nventory at the end of the month Direct labor 7,820 direct labor-hours were worked at a cost of $60,214 Required: L Compute the following variances for July: (Indicate the effect of each variance by selecting "F" for favorable, U" for untavorable, and "None" for no effect (.e., zero varlance). Input all amounts as positive values. Do not round intermediate calculations. Round final answer to the nearest whole dolar amount.) a. The materials price and quantity variances. b. The labor rate and emiciency variances. Material price variance Material quantity Labor rate ariande Labor efficiency variance 1bExplanation / Answer
Material price variance = (0.33-0.32)*79000 = 790 F
Material quantity variance = (5300*6-39750)*0.33 = 2624 U
Labour rate variance = (7.1*7820-60214) = 4692 U
Labour efficiency variance = (5300*1.4-7820)*7.1 = 2840 U
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