Question

Barley Hopp, Inc., manufactures custom-ordered commemorative beer steins. Its standard cost information follows: Standard Quantity 1.7 lbs. 1.7 hrs. Standard Price (Rate) $ 1.80 per lb. $ 11 per hr. Direct materials (clay) Direct labor Variable manufacturing overhead (based on direct labor hours) Fixed manufacturing overhead ($420,500 + 145,000 units) Standard Unit Cost $ 3.06 18.70 1.7 hrs. $ 1.1 per hr. 1.87 2.90 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 152.889 268, 200 $ 455,940 195,000 $2,827.500 $ 290.000 $ 440,000 Required: 1 & 2. Calculate the fixed overhead spending variance and volume variance for Borley Hopp 3. Calculate the total over: or underoppiled fixed manufacturing overhead for Barley Hopp

Answer 1

Answer

• Requirement 1

Fixed Overhead Spending Variance
(	Budgeted Fixed Overhead	-	Actual Fixed Overhead incurred	)
(	$                   420,500.00	-	$          440,000.00	)
	-19500
	Variance		$            19,500.00			Unfavourable-U

• Requirement 2

Fixed Overhead Production Volume Variance
(	Fixed Overhead applied = 150000 units x $ 2.90	-	Budgeted Fixed Overhead	)
(	$                   435,000.00	-	$          420,500.00	)
	14500
	Variance		$            14,500.00			Favourable-F

• Requirement 3

UNDER – APPLIED Fixed Overhead $ 5000
>Actual Fixed overhead = $ 440000
>Fixed overhead applied = $ 435000
>Under applied = 440000 – 435000 = $ 5000