Question

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

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)	1.50	lbs.	$	1.60	per lb.	$	2.40
Direct labor	1.50	hrs.	$	12.00	per hr.		18.00
Variable manufacturing overhead    (based on direct labor hours)	1.50	hrs.	$	1.20	per hr.		1.80
Fixed manufacturing overhead ($250,000.00 ÷ 100,000.00 units)							2.50

Barley Hopp had the following actual results last year:

Number of units produced and sold		110,000.00
Number of pounds of clay used		178,200.00
Cost of clay	$	267,300.00
Number of labor hours worked		150,000.00
Direct labor cost	$	2,025,000.00
Variable overhead cost	$	200,000.00
Fixed overhead cost	$	270,000.00

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.)

Direct Materials price variance?

Direct materials quantity variance?

Direct materials spending variance?

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.)

Direct Labor Rate variance?

Direct Labor Efficiency variance?

Direct Labor Spending variance?

3.	Calculate the variable overhead rate, efficiency, and total spending variances for Barley Hopp. (Indicate the effect of each variance by selecting "F" for favorable/Overapplied and "U" for unfavorable/underapplied.

Direct Overhead Rate variance?

Direct Overhead Efficiency variance?

Direct Overhead Spending variance?

Answer 1

Direct Material Price Variance = (Standard Rate per pound - Actual Rate per pound) x No. of pounds of clay used

.................................................= [$1.60 - ($267,300 / 178,200)] x 178,200

.................................................= ($1.60 - $1.50) x 178,200

.................................................= $17,820 Favorable

Direct Material Quantity Variance = (Standard Quantity Used - Actual Quantity Used) x Standard Rate per pound

......................................................= [(1.50 Pound x 110,000 units) - 178,200] x $1.60

......................................................= $21,120 Unfavorable

Direct Material Spending Variance = $21,120 - $17,820

.......................................................= $3,300 Unfavorable

Direct Labor Rate Variance = (Standard Rate per hour - Actual Rate per hour) x No. of hours worked

............................................= [$12 - ($2,025,000 / 150,000 hours)] x 150,000 hours

............................................= ($12 - $13.50) x 150,000

............................................= $225,000 Unfavorable

Direct Labor Efficiency Variance = (Total Standard hours - Total Actual hours) x Standard Rate per hour

....................................................= [(1.50 hour x 110,000 units) - 150,000] x $12

....................................................= $180,000 Favorable

Direct Labor Spending Variance = $225,000 - $180,000

....................................................= $45,000 Unfavorable

Direct Overhead Rate Variance = (Standard Rate per hour - Actual Rate per hour) x No. of hours worked

...................................................= [$1.20 - ($200,000 / 150,000 hours)] x 150,000 hours

...................................................= $20,000 Unfavorable

Direct Overhead Efficiency Variance = (Total Standard hours - Total Actual hours) x Standard Rate per hour

...........................................................= [(1.50 hour x 110,000 units) - 150,000] x $1.2

...........................................................= $18,000 Favorable

Direct Overhead Spending Variance = $20,000 - $18,000

..........................................................= $2,000 Unfavorable