Question

In: Accounting

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

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. $ 11.00 per hr. 17.60
Variable manufacturing overhead (based on direct labor hours) 1.60 hrs. $ 1.10 per hr. 1.76
Fixed manufacturing overhead ($275,000.00 ÷ 110,000.00 units) 2.50



Barley Hopp had the following actual results last year:

Number of units produced and sold 115,000
Number of pounds of clay used 198,200
Cost of clay $ 317,120
Number of labor hours worked 160,000
Direct labor cost $ 2,080,000
Variable overhead cost $ 220,000
Fixed overhead cost $ 280,000


Required:
a.
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.)



b. 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.)



c. 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.)

Solutions

Expert Solution

Std Quantity required per unit of output: 1.60 lbs
Actual output: 115000
Std quantity allowedd (115000*1.60): 184000 lbs
Std price per lbs: $ 1.70 per lbs
Actual Quantity used: 198200 lbs
Actual price per lbs (317120/198200): $ 1.60 per lbs
Material price variance: Actual Qty used ( Std price -Actual price)
198200 (1.70-1.60): $ 19820 Fav
Material Efficiency Variance: Std price (Std qty-Actual Qty)
1.70 (184000-198200) = $24140 Unfav
Total Material cost variance: Std price*Std qty - Actual Price*Actual Qty
1.7*184000-1.6*198200 = $ 4320 Unfav
Std labour hour per unit: 1.60 hr per unit
Std labour hours allowed (115000*1.60): 184000 hours
Std rate per hour: $ 11.00 per hour
Actual Labour hourrs: 160000 hours
Actual rate per hour (2080000/160000): $ 13 per hour
Labour rate variance: Actual hours (Std rate - Actual rate)
160000 (11-13): $ 320000 Unfav
Labour efficiency variance: Std rate (Std hours - Actual hours)
11 ( 184000-160000)= $ 264000 Fav
Labour cost variance: Std hours*Std rate - Actual Hours*Actual Rate
184000 *11 - 160000*13 = $ 56000 Unfav
Std variable OH rate per hour: 1.10 per hour
Actual Variable OH rate per hour (220000/160000): $ 1.375 per hour
Variable OH rate variance: Actual Hours (Std rate-Actual Rate)
160000 (1.10-1.375)= $ 44000 Unfav
Variable OH efficiency Variance: Std rate (Std hours-Actual hours)
1.10 (184000-160000)= $26400 Fav
Total Spending variance: Std oh rate *Std hours- Actual OH rate*Actual hours
1.10 *184000 - 1.375*160000 = $ 17600 Unfav

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