Question 1 Mega Toys has developed a new toy called the Brainbuster. The company has a standard cost system to help control costs and has established the following standards for the Brainbuster toy: Direct materials: 8 diodes per toy at $0.30 per diode Direct labour: 1.2 hours per toy at $7 per hour During August, the company produced 5,000 Brainbuster toys. Production data on the toy for August follow: Direct materials: 70,000 diodes were purchased at a cost of $0.28 per diode. 20,000 of these diodes were still in inventory at the end of the month. Direct labour: 6,400 direct labour -hours were worked at a cost of $48,000.

Required:

a) Calculate direct materials price and efficiency variances. Prepare a brief explanation of the possible causes of each variance.

b) Calculate direct labour rate and efficiency variances. Prepare a brief explanation of the possible causes of each variance.