Question

Orion Corporation has established the following standards for the prime costs of one unit of its chief product, dartboards. Direct material Direct labor Total Standard Quantity 1.00 pounds 0.80 hour Standard Price or Rate $1.60 per pound 6.00 per hour Standard Cost $17.60 4.80 22.40 During June, Orion purchased 357,000 pounds of direct material at a total cost of $628,320. The total wages for June were $183,396 75 percent of which were for direct labor. Orion manufactured 31,000 dartboards during June, using 316,200 pounds of the direct material purchased in June and 26,970 direct-labor hours Required Compute the following variances for June. (Do not round intermediate calculations. Indicate the effect of each variance by selecti "Favorable" or "unfavorable". Select "None" and enter "O" 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

Answer 1

1. DM Price Variance = (Standard Price - Actual Price) * Units Consumed

DM Price Variance = 1.60 * 31000 * 11 - 556512

DM Price Variance = $10912 Unfavorable

2. DM Quantity Varaince = (standard Quantity - Actual Qty) * Standard Price

DM Quantity Varaince = (11 *31000 - 316200) * 1.60

DM Quantity Varaince = $39680 Favorable

3. DM Purchase price variance = (Standard Price - Actual Price) * Actual Qty Purchased

DM Purchase price variance = (1.60 * 357000 - 628320

DM Purchase price variance = $57120 Unfavorable

4. Labor Rate Variance = (Standard Rate - Actual Rate) * Actual Hours

Labor Rate Variance = 6 * 26970 - $183396*75%

Labor Rate Variance = 161820 - 137547

Labor Rate Variance = $24273 Favorable

5.DL Efficiency Variance= (standard Hours - Actual Hours) * Standard Rate

DL Efficiency Variance= (31000 * 0.8 - 26970) * 6

DL Efficiency Variance= 13020 Unfavouranle