In: Accounting
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.)
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 |