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 $1.20 per pound $7.00 per hour Standard Quantity Direct material Direct labor Total Standard Cost S 8.40 2.80 $11.20 7.00 pounds 0.40 hour During June, Orion purchased 257,000 pounds of direct material at a total cost of $339,240. The total wages for June were $111,370 80 percent of which were for direct labor. Orion manufactured 35,000 dartboards during June, using 231,000 pounds of the direct material purchased in June and 15,050 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).) 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

Explanation / Answer

1 Direct materials rate=339240/257000= $1.32 Direct materials price variance=231000*(1.32-1.2)= $27720 U 2 Direct materials quantity variance=1.2*(231000-35000*7)= $16800 F 3 Direct materials purchase price variance=257000*(1.32-1.2)= $30840 U 4 Direct labor = 111370*80%= $89096 Direct labor rate variance = 89096-(15050*7)= $16254 F 5 Direct labor efficiency variance=7*(15050-35000*0.4)= $7350 U

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