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: Direct...

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:

Direct materials: 6 microns per toy at £ 0.50 per micron
Direct labour: 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 for use in production at
a cost of £ 0.48 per micron
Some 5,000 of these microns were still in I at the end of the month
Direct labour: 4,000 direct labour-hours were worked at a cost of £ 36,000

Required
(a) Compute the following variances for July:
i. Direct materials price and quantity variances.
ii. Direct labour rate and efficiency variances.
(b) Prepare a brief explanation of the significance and possible causes of each
variance.
(c) What is meant by the term management by exception?