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)	1.70	lbs.	$	1.80	per lb.	$	3.06
Direct labor	1.70	hrs.	$	11.00	per hr.		18.70
Variable manufacturing overhead (based on direct labor hours)	1.70	hrs.	$	1.10	per hr.		1.87
Fixed manufacturing overhead ($420,500.00 ÷ 145,000.00 units)							2.90

Barley Hopp had the following actual results last year:

Number of units produced and sold		150,000
Number of pounds of clay used		268,200
Cost of clay	$	455,940
Number of labor hours worked		195,000
Direct labor cost	$	2,827,500
Variable overhead cost	$	290,000
Fixed overhead cost	$	440,000

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

Material Price Variance	$    26,820.00	Favourable-F
Material quantity variance	$    23,760.00	Unfavourable-U
Total Material Variance	$      3,060.00	Favourable-F
Labor rate variance	$ 682,500.00	Unfavourable-U
Labor Efficiency variance	$ 660,000.00	Favourable-F
Total Labor variance	$    22,500.00	Unfavourable-U
Variable Overhead Rate Variance	$    75,500.00	Unfavourable-U
Variable Overhead Efficiency Variance	$    66,000.00	Favourable-F
Variable Overhead Spending Variance	$      9,500.00	Unfavourable-U

Working

Standard DATA for		150000	Beer Steins
	Quantity (SQ)	Rate (SR)	Standard Cost
	[A]	[B]	[A x B]
Direct Material	( 1.7 lbs of Clay x 150000 Beer Steins)=255000 lbs of Clay	$    1.80	$        459,000.00
Direct labor	( 1.7 Hrs x 150000 Beer Steins)=255000 Hrs	$ 11.00	$     2,805,000.00
Variable Overhead	( 1.7 Hrs x 150000 Beer Steins)=255000 Hrs	$    1.10	$        280,500.00

Actual DATA for		150000	Beer Steins
	Quantity (AQ)	Rate (AR)	Actual Cost
Direct Material	268200	$              1.70	$            455,940.00
Direct labor	195000	$            14.50	$        2,827,500.00
Variable Overhead	195000	$              1.49	$            290,000.00

Material Price Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Quantity
(	$                        1.80	-	$                       1.70	)	x	268200
	26820
	Variance		$            26,820.00			Favourable-F

Material Quantity Variance
(	Standard Quantity	-	Actual Quantity	)	x	Standard Rate
(	255000	-	268200	)	x	$       1.80
	-23760
	Variance		$            23,760.00			Unfavourable-U

Material Spending Variance
(	Standard Cost	-	Actual Cost	)
(	$           459,000.00	-	$          455,940.00	)
	3060
	Variance		$              3,060.00			Favourable-F

Labor Rate Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Labor Hours
(	$                     11.00	-	$                    14.50	)	x	195000
	-682500
	Variance		$          682,500.00			Unfavourable-U

Labour Efficiency Variance
(	Standard Hours	-	Actual Hours	)	x	Standard Rate
(	255000	-	195000	)	x	$    11.00
	660000
	Variance		$          660,000.00			Favourable-F

Labor Spending Variance
(	Standard Cost	-	Actual Cost	)
(	$       2,805,000.00	-	$      2,827,500.00	)
	-22500
	Variance		$            22,500.00			Unfavourable-U

Variable Overhead Rate Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Labor Hours
(	$ 1.10	-	$ 1.49	)	x	195000
	$           (75,500.00)
	Variance		$            75,500.00			Unfavourable-U

Variable Overhead Efficiency Variance
(	Standard Hours	-	Actual Hours	)	x	Standard Rate
(	255000	-	195000	)	x	$       1.10
	$             66,000.00
	Variance		$            66,000.00			Favourable-F

Variable Overhead Spending Variance
(	Standard Cost	-	Actual Cost	)
(	$           280,500.00	-	$          290,000.00	)
	-9500
	Variance		$              9,500.00			Unfavourable-U