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: Direct materials: 6 microns per toy at $0.34 per micron Direct labor: 1.2 hours per toy at $6.70 per hour During July, the company produced 4,500 Maze toys. The toy's production data for the month are as follows: Direct materials: 74,000 microns were purchased at a cost of $0.32 per micron. 40,250 of these microns were still in inventory at the end of the month. Direct labor: 5,800 direct labor-hours were worked at a cost of $41,180.
Required:
1. Compute the following variances for July:
a. Direct materials price and quantity variances.
b. Direct labor rate and efficiency variances.
2. Prepare a brief explanation of the possible causes of each variance.