Direct material Direct labor Total Standard Quantity 14.00 pounds 1.10 hour Stan

Question

Direct material Direct labor Total Standard Quantity 14.00 pounds 1.10 hour Standard Price or Rate $ 1.90 per pound $14.00 per hour Standard Cost $26.60 15.40 $42.00 During June, Orion purchased 411,000 pounds of direct material at a total cost of $858,990. The total wages for June were $480,480 90 percent of which were for direct labor. Orion manufactured 28,000 dartboards during June, using 383,600 pounds of the direct material purchased in June and 33,600 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 n 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

Explanation / Answer

Direct material price varinace = (Standard price - actual price) x Actual quantity used
= ($1.90 - $858,990 / 411,000) x 383,600
= 72,884 Unfavorable

Direct material quantity varinace = (Standard quantity - actual quantity used) x Standard price
= (28,000 x 14 - 383,600) x $1.90
= $15,960 Favorable

Direct material purchase price varinace = (Standard price - actual price) x quantity purchased
= ($1.90 - $858,990 / 411,000) x 411,000
= = $78,090 Unfavorable

Direct labor rate varinace = (Standard rate - actual rate) x Actual hours
= {$14.00 - ($480,480 x 90%/ 33,600)} x 33,600
= $37,968 Favorable

Direct labor efficiency varinace = (Standard hours - actual hours) x Standard rate
= (28,000 x 1.10 - 33,600) x $14.00
= $39,200 Unfavorable

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