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Orion Corporation has established the following standards for the prime costs of one unit of its...

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.

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

3.Direct-material purchase price variance

4.Direct-labor rate variance

5.Direct-labor efficiency variance

Solutions

Expert Solution

Direct Material

Standard Price (SP)

$2.20

Standard Quantity (SQ)

       150,000

Actual Quantity (AQ)

       135,000

Actual price (AP)
(397,320/172000)

$2.94

Material purchased (MP)

$172,000

Material Price Variance:

AQ

X

SP

Minus

AQ

X

AP

    135,000

X

$2.20

Minus

135,000

X

$2.94

   297,000

Minus

397,320

   (100,320)

Unfavourable

Material Quantity Variance:

SQ

X

SP

Minus

AQ

X

SP

    150,000

X

$2.20

Minus

135,000

X

$2.20

   330,000

Minus

297,000

       33,000

Favourable

Material Purchase Variance:

MP

X

SP

Minus

MP

X

AP

    172,000

X

$2.20

Minus

172,000

X

$2.94

   378,400

Minus

506,215

   (127,815)

Unfavourable

Direct Labour

Standard Rate (SR)

$7.00

Standard Hours (SH)
(1.4 *25,000)

    35,000

Actual Hours (AH)

    38,250

Actual Rate (AR)
(290,270*90%/38,250)

$6.83

Labour Rate Variance:

AH

X

SR

Minus

AH

X

AR

                             38,250

X

$7.00

Minus

   38,250

X

6.83

267,750

Minus

261,243

           6,507

Favourable

Labour Efficiency Variance:

SH

X

SR

Minus

AH

X

SR

                             35,000

X

$7.00

Minus

    38,250

X

$7.00

245,000

Minus

267,750

      (22,750)

Unfavourable

ekkarill92 answered 1 year ago
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