Question

PA9-1 Calculating Direct Material, Direct Labor, Variable Overhead Variances [LO 9-3, 9-4, 9-5]

Barley Hopp, Inc., manufactures custom-ordered commemorative beer steins. Its standard cost information follows:

	Standard Quantity		Standard Price (Rate)			Standard Unit Cost
Direct materials (clay)	1.60	lbs.	$	1.70	per lb.	$	2.72
Direct labor	1.60	hrs.	$	16.00	per hr.		25.60
Variable manufacturing overhead (based on direct labor hours)	1.60	hrs.	$	1.30	per hr.		2.08
Fixed manufacturing overhead ($374,000.00 ÷ 170,000.00 units)							2.20

Barley Hopp had the following actual results last year:

Number of units produced and sold		175,000
Number of pounds of clay used		318,200
Cost of clay	$	572,760
Number of labor hours worked		220,000
Direct labor cost	$	4,510,000
Variable overhead cost	$	340,000
Fixed overhead cost	$	380,000

Required:
1. Calculate the direct materials price, quantity, and total spending variances for Barley Hopp. (Do not round your intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable and "U" for unfavorable.)

	Direct Materials Price Variance Direct Materials Quantity Variance Direct Materials Spending Variance

2. Calculate the direct labor rate, efficiency, and total spending variances for Barley Hopp. (Do not round your intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable and "U" for unfavorable.)

	Direct Labor Rate Variance Direct Labor Efficiency Variance Direct Labor Spending Variance

3. Calculate the variable overhead rate, efficiency, and total spending variances for Barley Hopp.(Do not round your intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable/Overapplied and "U" for unfavorable/underapplied.)

	Variable Overhead Rate Variance Variable Overhead Efficiency Variance Variable Overhead Spending Variance

Answer 1

Summary of answer
Direct Materials Price Variance	31,820	U
Direct Materials Quantity Variance	64,940	U
Direct Materials Spending Variance	96,760	U
Direct Labor Rate Variance	990,000	U
Direct Labor Efficiency Variance	960,000	F
Direct Labor Spending Variance	30,000	U
Variable Overhead Rate Variance	54,000	U
Variable Overhead Efficiency Variance	78,000	F
Variable Overhead Spending Variance	24,000	F

	Minus sign indicate unfavorable variance.
	Measure	Pound
	Standard price per Pound	$           1.70
572760/318200	Actual price per Pound	$           1.80
1.6*175000	Standard quantity in Pounds	280000
	Actual quantity in Pounds	318200
	Standard price per Pound	1.70
Less	Actual price per Pound	-1.80
	Difference	-0.10
Multiply	Actual quantity in Pounds	318200
	Direct Materials Price Variance	$    (31,820)
	Indicate	Unfavorable
	Standard quantity in Pounds	280000
Less	Actual quantity in Pounds	-318200
	Difference	-38200
Multiply	Standard price per Pound	1.70
	Direct Materials Quantity Variance	$    (64,940)
	Indicate	Unfavorable
	Direct Materials Spending Variance (Total of both variance)	$    (96,760)
	Indicate	Unfavorable

	Minus sign indicate unfavorable variance.
	Measure	Hour
	Standard price per Hour	$              16.00
4,510,000/220000	Actual price per Hour	$              20.50
1.6*175000	Standard labor Hours	280000
	Actual labor Hours	220000
	Standard price per Hour	16.00
Less	Actual price per Hour	-20.50
	Difference	-4.50
Multiply	Actual labor Hours	220000
	Direct Labor Rate Variance	$       (990,000)
	Indicate	Unfavorable
	Standard labor Hours	280000
Less	Actual labor Hours	-220000
	Difference	60000
Multiply	Standard price per Hour	16.00
	Direct Labor Efficiency Variance	$          960,000
	Indicate	Favorable
	Direct Labor Spending Variance (Total of both variance)	$          (30,000)
	Indicate	Unfavorable

	Minus sign indicate unfavorable variance.
	Measure	Hour
	Standard variable overhead rate per Hour	$       1.300000
340,000/220000	Actual variable overhead rate per Hour	$       1.545455
1.6*175000	Standard Hours	280000
	Actual Hours	220000
	Standard variable overhead rate per Hour	1.300000
Less	Actual variable overhead rate per Hour	-1.545455
	Difference	-0.245455
Multiply	Actual Hours	220000
	Variable overhead Rate variance	$         (54,000)
	Indicate	Unfavorable
	Standard Hours	280000
Less	Actual Hours	-220000
	Difference	60000
Multiply	Standard variable overhead rate per Hour	1.30
	Variable overhead efficiency variance	$           78,000
	Indicate	Favorable
	Variable Overhead Spending Variance (Total of both variance)	$           24,000
	Indicate	Favorable