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.

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 "0" for no effect (i.e., zero variance).)

Standard Quantity Standard Price or Rate Standard Cost Direct material 6.00 pounds $ 2.20 per pound $ 13.20 Direct labor 1.40 hour $ 7.00 per hour 9.80 Total $ 23.00

Explanation / Answer

Compute the following variances for June.

1. Direct-material price variance (2.20-2.31)*135000 14850 U 2. Direct-material quantity variance (25000*6-135000)*2.2 33000 F 3. Direct-material purchase price variance (2.2-2.31)*172000 18920 U 4. Direct-labor rate variance (7*38250-261630) 6120 F 5 Direct-labor efficiency variance (25000*1.4-38250)*7 22750 U

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