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 Quantity 10.00 pounds 1.80 hour Standard Price or Rate $2.60 per pound $3.00 per hour Standard Cost Direct material Direct labor Total $26.00 5.40 $31.40 During June, Orion purchased 236,000 pounds of direct material at a total cost of $649,000. The total wages for June were $132,384, 75 percent of which were for direct labor. Orion manufactured 21,000 dartboards during June, using 205,800 pounds of the direct material purchased in June and 41,370 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 Direct-material purchase price variance 4. Direct-labor rate variance 5. Direct-labor efficiency variance

Explanation / Answer

Direct materials actual rate=649000/236000= $2.75 1 Direct material price variance=205800*(2.75-2.60)= $30870 Unfavorable 2 Direct material quantity variance=2.6*(205800-21000*10)= $10920 favorable 3 Direct material purchase price variance=236000*(2.75-2.60)= $35400 Unfavorable 4 Direct labor wages=132384*75%= $99288 Direct labor rate variance=99288-(41370*3)= $24822 Favorable 5 Direct labor efficiency variance=3*(41370-21000*1.8)= $10710 Unfavorable

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