Dawson Toys, Ltd. produces a toy called the Maze. The company has recently established a standard costing system to help control costs with the following standards for the Maze toy:

Direct materials: 8 microns per toy at $0.75 per micron
Direct labour: 0.9 hours per toy at $12 per hour
Variable overhead: 0.9 hours per toy at $3.05 per hour

During July, the company planned to make 4,100 toys, the normal volume, and produced 4,200 Maze toys. Production data for the month on the toy follow:

Direct materials: 25,000 microns were purchased for use in production at a cost of $0.60 per micron. 5,000 of these microns were still in inventory at the end of the month.
Direct labour: 4,000 direct labour-hours were worked at a cost of $52,000.

Variable overhead cost was $12,340, and fixed overhead cost was $44,000. The budget variance for July was $0.

Required:

1. Compute the following variances for July:

a. Direct materials price and quantity variances.

b. Direct labour rate and efficiency variances.

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

3. Compute the variable overhead cost variances. Based on your calculation, is it possible to conclude that there were inefficiencies in operations causing excessive variable overhead to be incurred?

4. Compute the fixed overhead volume variance.

5. Is there over- or underapplied overhead? How much?