EXERCISE $10-8$ Direct Materials and Direct Labor Variances LO$10-1,$ LO$10-2$

Dawson Toys, Ltd$.,$ produces a toy called the Maze. The company has recently created 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 $$1\mathrm{.}50$ per micron

Direct labor: $1\mathrm{.}3$ hours per toy at $$21$ per hour

During July, the company produced $3,000$ Maze toys. The toy's production data for the month are as follows:

Direct materials: $25,000$ microns were purchased at a cost of $$1\mathrm{.}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 $$88,000.$

Required:

Compute the following variances for July:

a$.$ The materials price and quantity variances.

b$.$ The labor rate and efficiency variances.

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