Question: EXERCISE 11-8 Direct Materials and Direct Labor Variances

Dawson Toys, Ltd., 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: 6 microns per toy at $0.50 per micron

Direct labor: 1.3 hours per toy at $8 per hour

During July, the company produced 3,000 Maze toys. Production data for the month on the toy follow:

Direct materials: 25,000 microns were purchased at a cost of $0.48 per micron. 5,000 of these microns were still in inventory at the end of the month.

Direct labor: 4,000 direct labor-hours were worked at a cost of $36,000.

Required:

1. Compute the following variances for July:

1. The materials price and quantity variances.
2. The labor rate and efficiency variances.

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

Price: $2.99

Solution: The downloadable solution consists of 2 pages
Deliverable: Word Document