Question no 1

If the materials price variance is favorable but the material quantity variance is unfavorable, what might this indicate? Describe briefly

Question no 2

Topper Toys has developed a new toy called the Brain buster. The company has a standard cost system to help control costs and has established the following standards for the Brain buster toy.

Direct material: 8 diodes per day at $ 0.30 per diode

Direct labor: 0.6 hours per toy at $14 per hour

During the august, the company produced 5,000 Brain buster toys. Production data on the toy for August follow.

Direct material: 7,000 diodes were purchased at cost of $0.28 per diode. 20,000 of these diodes were still in inventory at the end of month.

Direct labor: 3,200 direct labor hours were worked at a cost $48,000

Required:

1. Compute the following variances for August

• Direct material price and quantity variance
• Direct labor rate and efficiency variance

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