Week 5: Homework 4
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Exercise 10-8 (Algo) Direct Materials and Direct Labor Variances [LO10-1, LO10-2]
Dawson Toys, Limited, produces a toy called the Maze. The company has recently created 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 $0.33 per micron
Direct labor: 1.5 hours per toy at $7.30 per hour
During July, the company produced 5,000 Maze toys. The toy’s production data for the month are as follows:
Direct materials: 70,000 microns were purchased at a cost of $0.31 per micron. 32,500 of these microns were still in
inventory at the end of the month.
Direct labor: 7,900 direct labor-hours were worked at a cost of $60,040.
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 answer to the nearest whole dollar amount.)
a. The materials price and quantity variances.
b. The labor rate and efficiency variances.
1a. Material price variance
1a. Material quantity variance
1b. Labor rate variance
1b. Labor efficiency variance
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