EXERCISE 11-7 Direct Materials and Direct Labor Variances [LO2, LO3] Dawson Toys, Ltd., produces a toy called the Maze. The company has recently established a standard cost system to help control costs and has established the following standards for the Maze toy: Lissn Direct materials: 6 microns per toy at $0.50 per micron Direct labor: 1.3 hours per toy at $8 per hour During July, the company produced 3,000 Maze toys. Production data for the month on the toy follow: Direct materials: 25,000 microns were purchased at a cost of $0.48 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 $36,000. Required: 1. Compute the following variances for July: a. b. Direct materials price and quantity variances. Direct labor rate and efficiency variances. 2. Prepare a brief explanation of the possible causes of each variance.