Topper Toys has developed a new toy called the Brainbuster.
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.
1. Compute the following variances for August:
a. Direct materials price and quantity variances.
b. Direct labor rate and efficiency variances.
2. Prepare a brief explanation of the possible causes of each variance.