Question

Orion Corporation has established the following standards for the prime costs of one unit of its chief product, dartboards. Stall Direct material Direct labor Standard Quantity 11.00 pounds 1.90 hour Standard Price or Rate $ 2.70 per pound $12.00 per hour Standard Cost $29.70 22.80 $ 52.50 Total During June, Orion purchased 247,000 pounds of direct material at a total cost of $706,420. The total wages for June were $511,680, 90 percent of which were for direct labor. Orion manufactured 20,000 dartboards during June, using 214,000 pounds of the direct material purchased in June and 41,600 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).)

Answer 1

Direct Material Price Variance= (Actual Price * Actual Quantity - Standard Price * Actual Quantity) Actual price is (706420/247000) S 2.86/ Direct Material Price Variance ((2.86 214000)-(2.70 2140000) = Direct Material Price Variance (612040-594000) Direct Material Price Variance S 34,240 Unfavourable. = Direct-material quantity variance (Standard price * Actual Quantity - Standard price * Standard Qty) ((2.70 214000)-(2.70 11 20000)) Direct-material quantity variance Direct-material quantity variance (577800-594000) Direct-material quantity variance 16,200 Favourable Direct materials price variance = (Actual quantity purchased x Actual rate) (Actual quantity purchsed Standard rate) Direct materials price variance (247000*2.86)-(247000*2.70) Direct materials price variance = 706420-666900 Direct materials price variance = 39,520 Unfavorable Direct-labor rate variance (Actual Rate - Standard Rate)*Actual Hours) Actual rate (511680*90%)/41600 S11.07/. Direct-labor rate variance = ((11.07-12.00) 41600) Direct-labor rate variance $ 38,688 Favourable Direct-labor efficiency variance Standard price *(Actual Quantity - Standard Quantity) Direct-labor efficiency variance 12.00*(41600-(1.90*20000) Direct-labor efficiency variance= 12.00*(41600-38000) Direct-labor efficiency variance S 43,200 Unfavourable