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Material and Labor Variances

Exercise 10- 9 Material and Labor Variances [LO2, LO3]

Topper Toys has developed a new toy called the Brainbuster. The company has a standard cost system to help control costs and has established the following standards for the Brainbuster toy:
Direct materials: 8 diodes per toy at $0.30 per diode
Direct labor: 1.2 hours per toy at $7 per hour
During August, the company produced 5,000 Brainbuster toys. Production data on the toy for August follow:
Direct materials: 70,000 diodes were purchased at a cost of $0.28 per diode. 20,000 of these diodes were still in inventory at the end of the month. Direct labor: 6,400 direct labor-hours were worked at a cost of $48,000.

Requirement 1:
Compute direct materials price and quantity variances for August. (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. Omit the "$" sign in your response.

Material price variance $

Material quantity variance $

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Requirement 2:
Compute direct labor rate and efficiency variances for August. (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. Omit the "$" sign in your response.

Labor rate variance $

Labor efficiency variance $

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Hint 1 | Hint 2

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Solution Summary

The solution explains how to calculate material and labor variances

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