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. Round final answers to the nearest whole dollar amount.) a. The materials price and quantity variances. b. The labor rate and efficiency
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
Dawson Toys, Ltd., produces a toy called the Maze. The company has recently established a
Direct materials: 7 microns per toy at $0.32 per micron
Direct labor: 1.4 hours per toy at $7.10 per hour
During July, the company produced 4,600 Maze toys. The toy's production data for the month are as follows:
Direct materials: 73,000 microns were purchased at a cost of $0.30 per micron. 32,750 of these microns were still in inventory at the end of the month.
Direct labor: 6,740 direct labor-hours were worked at a cost of $50,550.
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. Round final answers to the nearest whole dollar amount.)
a. The materials price and quantity variances.
b. The labor rate and efficiency variances.
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