Orion Corporation has established the following standards for the prime costs of

Question

Orion Corporation has established the following standards for the prime costs of one unit of its chief product, dartboards Standard Price or Rate $2.20 per pound $7.00 per hour Standard Cost $13.20 9.80 $23.00 Standard Quantity Direct material Direct labor Total 6.00 pounds 1.40 hour During June, Orion purchased 172,000 pounds of direct material at a total cost of $397,320. The total wages for June were $290,700, 90 percent of which were for direct labor. Orion manufactured 25,000 dartboards during June, using 135,000 pounds of the direct material purchased in June and 38,250 direct-labor hours Required: Compute the following variances for June. (Do not round intermediate calculations. Indicate the effect of each variance by selecting "Favorable" or "Unfavorable". Select "None" and enter "O" for no effect (i.e., zero variance).) 1. Direct-material price variance 2. Direct-material quantity variance 3. Direct-material purchase price variance 4. Direct-labor rate variance 5. Direct-labor efficiency variance nfavorable Favorable nfavorable avorable nfavorable

Explanation / Answer

Standard Actual Particulars Qty/ hours Rate amount Qty/ hours Rate amount Materials         150,000.00                      2.20         330,000.00         172,000.00                      2.31         397,320.00 Labour            35,000.00                      7.00         245,000.00            38,250.00                      6.84         261,630.00 Actual output            25,000.00 Materials reqd (25000*6)         150,000.00 Labour hrs reqd (25000*1.4)            35,000.00 DMPV = (SP-AP)*AQ used DMPV = (2.20 - 2.31)135000 DMPV = 14,850U Direct Material purchase price variance = (SP-AP)*AQ Purchased Direct Material purchase price variance = (2.20 - 2.31)172000 Direct Material purchase price variance = 18,920 U DMQV= (SQ-AQ)SP DMQV= (150,000 - 135000)2.20 DMQV= 33,000 F DLRV= (SR-AR)AH DLRV= (7 - 6.84)38250 DLRV= 6,120 F DLEV = (SH-AH)SR DLEV = (35000 - 38250)7 DLEV = 22,750 U

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