Question

Barley Hopp, Inc., manufactures custom-ordered commemorative beer steins. Its standard cost information follows: Standard Quantity 1.8 lbs 1.8 hrs Standard Price Standard Unit Cost 3.42 19.80 (Rate) $1.90 per lb. 11 per hr. 1.1 per hr Direct materials (clay) Direct labor Variable manufacturing overhead (based on direct labor hours) Fixed manufacturing overhead (S396,000 180,000 units) 1.8 hrs $ 1.98 2.20 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 185,000 338,200 676,400 230,000 $3,680,000 360,000 $ 380,000 Variable overhead cost Fixed overhead cost Required: 1. Calculate the fixed overhead spending variance for Barley Hopp. (Do not round your intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable,"U" for unfavorable.) Fixed Overhead Spending Variance 2. Calculate the fixed overhead volume variance for Barley Hopp. (Do not round your intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable,"U" for unfavorable.) Fixed Overhead Volume Variance

Answer 1

Computation of Fixed overhead spending variance

= Actual fixed overhead - Budgeted fixed overhead

(380000-396000)= $16000 F

Computation of Fixed overhead volume variance

= (Actual units produced x Standard rate) - (Budgeted units x Standard rate)

=(185000*2.2)-(180000*2.2)= $11000 F

Part-3

Computation of Applied fixed overhead

= Actual units produced x Standard fixed overhead rate

=(185000*2.2)=$407000

Overapplied Overhead / (Underapplied Overhead )= Applied Overhead- Actual Overhead

$407000-$380000= $27000 Underapplied