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 ($338,000.00 - 130,000.00 units) Standard Quantity 1.70 lbs. 1.70 hrs. 1.70 hrs. Standard Price (Rate) $ 1.80 per lb. $15.00 per hr. $ 1.10 per hr. Standard Unit Cost $ 3.06 25.50 1.87 2.60 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 135,000 238,200 $ 404,940 180,000 $3,510,000 $ 260,000 $ 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

Ans. 1 a	Materials price variance = (Standard price * Actual quantity) - Actual materials purchased cost
		($1.80 * 238,200) - $404,940
		$428,760 - $404,940
		$23,820	favorable
	*Standard quantity = Number of units produced and sold * Standard quantity per unit of output
		135,000 * 1.70 Ibs.
		229,500 Ibs.
Ans. 1 b	Materials quantity variance = (Standard quantity - actual quantity) * Standard price
		(229,500 - 238,200) * $1.80
		-8,700 * $1.80
		-$15,660	(or   $15,660   unfavorable)
Ans. 1 c	Materials spending variance = (Standard quantity * Standard price) - Actual materials purchased cost
		($229,500 * $1.80) - $404,940
		$413,100 - $404,940
		$8,160	favorable