Question
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
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 $4.50 per micron Direct labour: 0.90 hours per toy at $16.00 per hour Variable overhead: 0.90 hours per toy at $7.00 per hour
During July, the company planned to make 5,700 toys, the normal volume, and produced 5,800 Maze toys. Production data for the month on the toy follow:
Direct materials: 34,770 microns were purchased for use in production at a cost of $4.40 per micron. 13,000 of these microns were still in inventory at the end of the month.
Direct labour: 5,700 direct labour-hours were worked at a cost of $96,900.
Variable overhead cost was $42,440, and fixed overhead cost was $65,400. The budget variance for July was $0.
1a. Compute the variable overhead cost variances.
1b. Based on your calculation, is it possible to conclude that there were inefficiencies in operations causing excessive variable overhead to be incurred?
multiple choice
Yes
No
1c. Compute the fixed overhead volume variance. (Round intermediate calculation to 3 decimal places and round your final answer to nearest whole dollar amount.)
1d. Is there over- or underapplied fixed overhead? (Round intermediate calculation to 3 decimal places and round your final answer to nearest whole dollar amount.)
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