Question

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.	$	14.00	per hr.		22.40
Variable manufacturing overhead (based on direct labor hours)	1.60	hrs.	$	1.20	per hr.		1.92
Fixed manufacturing overhead ($312,500.00 ÷ 125,000.00 units)							2.50

Barley Hopp had the following actual results last year:

Number of units produced and sold		130,000
Number of pounds of clay used		228,200
Cost of clay	$	365,120
Number of labor hours worked		175,000
Direct labor cost	$	2,975,000
Variable overhead cost	$	250,000
Fixed overhead cost	$	330,000

Required:
1. Calculate the direct materials price, quantity, and total spending variances for Barley Hopp.
2. Calculate the direct labor rate, efficiency, and total spending variances for Barley Hopp.
3. Calculate the variable overhead rate, efficiency, and total spending variances for Barley Hopp.

Answer 1

Solution

Total Material Variance	$         11,520.00	Unfavourable-U
Material Price Variance	$         22,820.00	Favourable-F
Material quantity variance	$         34,340.00	Unfavourable-U

.

Labor rate variance	$      525,000.00	Unfavourable-U
Labor Efficiency variance	$      462,000.00	Favourable-F
Total Labor variance	$         63,000.00	Unfavourable-U

.

Variable Overhead Rate Variance	$         40,000.00	Unfavourable-U
Variable Overhead Efficiency Variance	$         39,600.00	Favourable-F
Variable Overhead Spending Variance	$               400.00	Unfavourable-U

Working

Actual DATA for		130000	Units
	Quantity (AQ)	Rate (AR)	Actual Cost
Direct Material	228200	$            1.60	$       365,120.00
Direct labor	175000	$         17.00	$    2,975,000.00
Variable Overhead	175000	$            1.43	$       250,000.00

.

Standard DATA for		130000	Units
	Quantity (SQ)	Rate (SR)	Standard Cost
	[A]	[B]	[A x B]
Direct Material	( 1.6 pounds x 130000 Units)=208000 pounds	$                   1.70	$          353,600.00
Direct labor	( 1.6 Hour x 130000 Units)=208000 Hour	$                14.00	$      2,912,000.00
Variable Overhead	( 1.6 Hour x 130000 Units)=208000 Hour	$                   1.20	$          249,600.00

.

Material Price Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Quantity
(	$                    1.70	-	$                        1.60	)	x	228200
	22820
	Variance		$             22,820.00			Favourable-F
Material Quantity Variance
(	Standard Quantity	-	Actual Quantity	)	x	Standard Rate
(	208000	-	228200	)	x	$              1.70
	-34340
	Variance		$             34,340.00			Unfavourable-U
Material Spending Variance
(	Standard Cost	-	Actual Cost	)
(	$       353,600.00	-	$           365,120.00	)
	-11520
	Variance		$             11,520.00			Unfavourable-U
Labor Rate Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Labor Hours
(	$                  14.00	-	$                      17.00	)	x	175000
	-525000
	Variance		$           525,000.00			Unfavourable-U
Labour Efficiency Variance
(	Standard Hours	-	Actual Hours	)	x	Standard Rate
(	208000	-	175000	)	x	$           14.00
	462000
	Variance		$           462,000.00			Favourable-F
Labor Spending Variance
(	Standard Cost	-	Actual Cost	)
(	$   2,912,000.00	-	$       2,975,000.00	)
	-63000
	Variance		$             63,000.00			Unfavourable-U
Variable Overhead Rate Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Labor Hours
(	$                    1.20	-	$                        1.43	)	x	175000
	$       (40,000.00)
	Variance		$             40,000.00			Unfavourable-U
Variable Overhead Efficiency Variance
(	Standard Hours	-	Actual Hours	)	x	Standard Rate
(	208000	-	175000	)	x	$              1.20
	$         39,600.00
	Variance		$             39,600.00			Favourable-F
Variable Overhead Spending Variance
(	Standard Cost	-	Actual Cost	)
(	$       249,600.00	-	$           250,000.00	)
	-400
	Variance		$                   400.00			Unfavourable-U