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

During June, Orion purchased 227,000 pounds of direct material at a total cost of $274,670. The total wages for June were $72,576, 75 percent of which were for direct labor. Orion manufactured 36,000 dartboards during June, using 205,200 pounds of the direct material purchased in June and 11,520 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 Direct Material 6 pounds $1.1 per pound $6.60 Direct Labor .3 $6.00 $1.8

Explanation / Answer

Variances :

Material quantity variance = (Standard quantity-actual quantity)standard rate per pound

= (36000*3-205200)1.1

Material quantity varianc = 11880 Favourable

Material price variance = (Standard price-actual price)Actual quantity purchased

= (1.1*227000-274670)

Material price variance = 24970 Unfavourable

Labour efficiency variance = (Standard hour-actual hour)standard rate per hour

= (36000*.3-11520)6

Labour efficiency variance = 4320 Unfavourable

Labour rate variance = (Standard rate-actual rate)actual hours

= (6*11520-54432)

Labour rate variance = 14688 Favourable

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