Question

Barley Hopp, Inc., manufactures custom-ordered commemorative beer steins. Its standard cost information follows: Direct materials (clay) Direct labor Variable manufacturing overhead (based on direct labor hours) Fixed manufacturing overhead ($356,500.00 = 155,000.00 units) Standard Quantity 1.70 lbs. 1.70 hrs. 1.70 hrs. Standard Price (Rate) $ 1.80 per lb. $13.00 per hr. $ 1.40 per hr. Standard Unit Cost $ 3.06 22.10 2.38 2.30 Barley Hopp had the following actual results last year: Number of units produced and sold Number of pounds of clay used Cost of clay Number of labor hours worked Direct labor cost Variable overhead cost Fixed overhead cost 160,000 288,200 $ 547,580 205,000 $3,587,500 $ 310,000 $ 350,000 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.) Direct Materials Price Variance Direct Materials Quantity Variance Direct Materials Spending Variance

Answer 1

Answer

• Working

Actual DATA for		160000	units
	Quantity (AQ)	Rate (AR)	Actual Cost
Direct Material	288200	$                   1.90	$        547,580.00
Direct labor	205000	$                17.50	$     3,587,500.00
Variable Overhead	205000	$                   1.51	$        310,000.00

Standard DATA for		160000	units
	Quantity (SQ)	Rate (SR)	Standard Cost
	[A]	[B]	[A x B]
Direct Material	( 1.7 lbs x 160000 units)=272000 lbs	$                   1.80	$     489,600.00
Direct labor	( 1.7 hours x 160000 units)=272000 hours	$                13.00	$ 3,536,000.00
Variable Overhead	( 1.7 hours x 160000 units)=272000 hours	$                   1.40	$     380,800.00

• Requirement 1, with calculation

Material Price Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Quantity
(	$                                1.80	-	$                       1.90	)	x	288200
	-28820
	Variance		$            28,820.00			Unfavourable-U
Material Quantity Variance
(	Standard Quantity	-	Actual Quantity	)	x	Standard Rate
(	272000	-	288200	)	x	$                           1.80
	-29160
	Variance		$            29,160.00			Unfavourable-U
Material Spending Variance
(	Standard Cost	-	Actual Cost	)
(	$                   489,600.00	-	$          547,580.00	)
	-57980
	Variance		$            57,980.00			Unfavourable-U

• Requirement 2 with calculations

Labor Rate Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Labor Hours
(	$                              13.00	-	$                    17.50	)	x	205000
	-922500
	Variance		$          922,500.00			Unfavourable-U
Labour Efficiency Variance
(	Standard Hours	-	Actual Hours	)	x	Standard Rate
(	272000	-	205000	)	x	$                        13.00
	871000
	Variance		$          871,000.00			Favourable-F
Labor Spending Variance
(	Standard Cost	-	Actual Cost	)
(	$                3,536,000.00	-	$      3,587,500.00	)
	-51500
	Variance		$            51,500.00			Unfavourable-U

• Requirement 3 with calculations

Variable Overhead Rate Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Labor Hours
(	$                                1.40	-	$                       1.51	)	x	205000
	-23000
	Variance		$            23,000.00			Unfavourable-U
Variable Overhead Efficiency Variance
(	Standard Hours	-	Actual Hours	)	x	Standard Rate
(	272000	-	205000	)	x	$                           1.40
	93800
	Variance		$            93,800.00			Favourable-F
Variable Overhead Spending Variance
(	Standard Cost	-	Actual Cost	)
(	$                   380,800.00	-	$          310,000.00	)
	70800
	Variance		$            70,800.00			Favourable-F