Question

Orion Corporation has established the following standards for the prime costs of one unit of its chief product, dartboards.

	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										$	23.00

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.

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

Answer 1

F G B C D E (Actual Price - Budgeted Price) * Actual Quantity ($2.31 - $2.20) * 135,000 pounds $ 14,850 Unfavourable А 1 Direct Material Price Variance = 2 Direct Material Price Variance = 3 Direct Material Price Variance = 4 5 Direct Material Quantity Variance = 6 Direct Material Quantity Variance = 7 Direct Material Quantity Variance = (Actual Usage - Standard Usage) * Standard Cost per pound (135,000 pounds - 150,000 pounds) * $2.2 $ 33,000 Favourable 8 (Actual Price - Standard Price) * Actual Quantity Purchased ($2.31 - $2.20) * 172,000 pounds $ 18,920 Unfavourable 9 Direct Material Purchase Price Variance = 10 Direct Material Purchase Price Variance = 11 Direct Material Purchase Price Variance = 12 13 Direct Labor rate Variance = 14 Direct Labor rate Variance = 15 Direct Labor rate Variance = 16 17 Direct Labor efficiency Variance = 18 Direct Labor efficiency Variance = 19 Direct Labor efficiency Variance = (Actual Rate - Standard Rate) * Actual Hours Worked ($6.84 per hour - $7 per hour) * 38,250 Labor hours $ 6,120 Favourable (Actual hours - Standard hours) * Standard rate = labor efficiency variance (38,250 - 35,000) * $7 per hour $ 22,750 Unfavourable