Exercise - 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: 7 microns per toy at $0.34 per micron

Direct labor: 1.5 hours per toy at $6.70 per hour

During July, the company produced 4,500 Maze toys. Production data for the month on the toy follow:

Direct materials: 71,000 microns wore purchased at a cost of $0.31 per micron. 31,625 of these microns were still in inventory at the end of the month.

Direct labor: 7,150 direct labor-hours were worked at a cost of $50,765.

Required: 1. Compute the following variances for July:

a. The materials price and quantity variances.

b. The labor rate and efficiency variances.