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Dawson Toys, Ltd., produces a toy called the Maze. The company has recently created a...

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Accounting

Dawson Toys, Ltd., 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 $1.50 per micron
Direct labor: 1.3 hours per toy at $21 per hour

During July, the company produced 3,000 Maze toys. The toys production data for the month are as follows:

  1. Direct materials: 25,000 microns were purchased at a cost of $1.48 per micron. 5,000 of these microns were still in inventory at the end of the month.

  2. Direct labor: 4,000 direct labor-hours were worked at a cost of $88,000.

Required:

  1. Compute the following variances for July:

    1. The materials price and quantity variances.

    2. The labor rate and efficiency variances.

  2. Prepare a brief explanation of the possible causes of each variance.

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