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.	$	10.00	per hr.		16.00
Variable manufacturing overhead (based on direct labor hours)	1.60	hrs.	$	1.10	per hr.		1.76
Fixed manufacturing overhead ($273,000.00 ÷ 105,000.00 units)							2.60

Barley Hopp had the following actual results last year:

Number of units produced and sold		110,000
Number of pounds of clay used		188,200
Cost of clay	$	301,120
Number of labor hours worked		155,000
Direct labor cost	$	1,798,000
Variable overhead cost	$	210,000
Fixed overhead cost	$	275,000

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.)



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.)



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.)

Answer 1

Requried 1 :
Actual direct materials rate = Actual direct materials cost / Actual direct materials quantity = 301120 / 188200	1.60
Direct materials price variance = ( Actual price - Standard price ) * Actual quantity = ( 1.60 - 1.70 ) * 188200	18820	F
Standard direct materials quantity for actual production = Standard direct materials quantity per unit * Actual unit production = 1.60 * 110000	176000
Direct materials quantity variance = ( Actual quantity - Standard quantity ) * Standard rate = ( 188200 - 176000 ) * 1.70	20740	U
Standard direct materials cost for actual production = Standard direct materials quantity for Actual production * Standard rate = 176000 * 1.70	299200
Direct materials spending variance = Actual cost - Standard cost = 301120 - 299200	1920	U
Required 2 :
Actual direct labor rate = Actual direct labor cost / Actual direct labor hours = 1798000 / 155000	11.60
Direct labor rate variance = ( Actual rate - Standard rate ) * Actual hours = ( 11.60 - 10 ) * 155000	248000	U
Standard direct labor hours for actual production = Standard direct labor hours per unit * Actual units production = 1.60 * 110000	176000
Direct labor efficiency variance = ( Actual hours - Standard hours ) * Standard rate = ( 155000 - 176000 ) * 10	210000	F
Standard direct labor cost for actual production = Standard direct labor hours for actual production * Standard rate = 176000 * 10	1760000
Direct labor spending variance = Actual cost - Standard cost = 1798000 - 1760000	38000	U
Required 3 :
Actual variable overhead rate = Actual variable overhead cost / Actual direct labor hours = 210000 / 155000	1.35
Variable overhead rate variance = ( Actual rate - Standard rate ) * Actual hours = ( 1.35 - 1.10 ) * 155000	38750	U
Variable overhead efficiency variance = ( Actual hours - Standard hours ) * Standard rate = ( 155000 - 176000 ) * 1.10	23100	F
Standard variable cost for actual production = Standard direct labor hours for actual production * Standard rate = 176000 * 1.10	193600
Variable overhead spending variance = Actual cost - Standard cost = 210000 - 193600	16400	U