Orion Corporation has established the following standards for the prime costs of
ID: 2533488 • Letter: O
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.
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
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 $ 23.00Explanation / Answer
Direct Material
Standard Price (SP)
$2.20
Standard Quantity (SQ)
150,000
Actual Quantity (AQ)
135,000
Actual price (AP)
(397,320/172000)
$2.94
Material purchased (MP)
$172,000
Material Price Variance:
AQ
X
SP
Minus
AQ
X
AP
135,000
X
$2.20
Minus
135,000
X
$2.94
297,000
Minus
397,320
(100,320)
Unfavourable
Material Quantity Variance:
SQ
X
SP
Minus
AQ
X
SP
150,000
X
$2.20
Minus
135,000
X
$2.20
330,000
Minus
297,000
33,000
Favourable
Material Purchase Variance:
MP
X
SP
Minus
MP
X
AP
172,000
X
$2.20
Minus
172,000
X
$2.94
378,400
Minus
506,215
(127,815)
Unfavourable
Direct Labour
Standard Rate (SR)
$7.00
Standard Hours (SH)
(1.4 *25,000)
35,000
Actual Hours (AH)
38,250
Actual Rate (AR)
(290,270*90%/38,250)
$6.83
Labour Rate Variance:
AH
X
SR
Minus
AH
X
AR
38,250
X
$7.00
Minus
38,250
X
6.83
267,750
Minus
261,243
6,507
Favourable
Labour Efficiency Variance:
SH
X
SR
Minus
AH
X
SR
35,000
X
$7.00
Minus
38,250
X
$7.00
245,000
Minus
267,750
(22,750)
Unfavourable
Direct Material
Standard Price (SP)
$2.20
Standard Quantity (SQ)
150,000
Actual Quantity (AQ)
135,000
Actual price (AP)
(397,320/172000)
$2.94
Material purchased (MP)
$172,000
Material Price Variance:
AQ
X
SP
Minus
AQ
X
AP
135,000
X
$2.20
Minus
135,000
X
$2.94
297,000
Minus
397,320
(100,320)
Unfavourable
Material Quantity Variance:
SQ
X
SP
Minus
AQ
X
SP
150,000
X
$2.20
Minus
135,000
X
$2.20
330,000
Minus
297,000
33,000
Favourable
Material Purchase Variance:
MP
X
SP
Minus
MP
X
AP
172,000
X
$2.20
Minus
172,000
X
$2.94
378,400
Minus
506,215
(127,815)
Unfavourable
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