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: During July, the company produced 3,000 Maze toys. The toys production data for the month are as follows: Direct materials: 25,000 microns were purchased at a cost of $1.48 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.

Direct materials: 6 microns per toy at $1.50 per micron

Direct labor: 1.3 hours per toy at $21 per hour

Required:

Compute the following variances for July:

a. The materials price and quantity variances.

b. The labor rate and efficiency variances.

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