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 Cost $10.50 9.10 $19.60 Standard Quantity Direct material Direct labor Total Standard Price or Rate $2.10 per pound $7.00 per hour 5.00 pounds 1.30 hour During June, Orion purchased 151,000 pounds of direct material at a total cost of $332,200. The total wages for June were $276,900 90 percent of which were for direct labor. Orion manufactured 26,000 dartboards during June, using 117,000 pounds of the direct material purchased in June and 36,920 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 avorable nfavorable avorable nfavorable

Explanation / Answer

Standard Actual Particulars Qty/ hours Rate amount Qty/ hours Rate amount Materials          130,000.00                           2.10       273,000.00          151,000.00                   2.20            332,200.00 Labour            33,800.00                      7.0000       236,600.00            36,920.00                   6.75            249,210.00 Actual output            26,000.00 Materials reqd (26000*5)          130,000.00 Labour hrs reqd (26000*1.3)            33,800.00 DMPV = (SP-AP)*AQ   DMPV = (2.10 - 2.20)117000 DMPV = 11,700 U Direct Material purchase price variance = (SP-AP)*AQ Purchased Direct Material purchase price variance = (2.10 - 2.20)151000 Direct Material purchase price variance = 15,100 U DMQV= (SQ-AQ)SP DMQV= (130,000 - 117000)2.10 DMQV= 27,300 F DLRV= (SR-AR)AH DLRV= (7 - 6.75)36920 DLRV= 9,230 F DLEV = (SH-AH)SR DLEV = (33800 - 36920)7 DLEV = 21,840 U

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