Question

Barley Hopp, Inc., manufactures custom-ordered glass windows. Its standard cost information follows: Standard Quantity Direct materials (glass) 1.70 lbs. Direct labor 1.70 hrs. Variable manufacturing overhead (based on direct labor hours) 1.70 hrs. Fixed manufacturing overhead ($ 402,500.00 + 175,000.00 units) Standard Price Standard (Rate) Unit Cost $ 1.80 per lb. $ 3.06 $10.00 per hr. (8 01:00:30 $ 1.10 per hr. 1.87 2.30 Barley had the following actual results last year: Number of units produced and sold Number of pounds of glass used Cost of glass Number of labor hours worked Direct labor cost Variable overhead cost Fixed overhead cost 180,000 328,200 $ 623,580 225,000 $3,082,500 $ 350,000 $ 400,000 Required: 1. Calculate the direct materials price, quantity, and total spending variances for Barley. 2. Calculate the direct labor rate, efficiency, and total spending variances for Barley. 3. Calculate the variable overhead rate, efficiency, and total spending variances for Barley. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3

Answer 1

1) Material Price Variance = Actual pounds used x (Standard price per pound - Actual price per pound) Actual quantity used (pounds) 328,200 Standard price per pound $1.80 Actual price per pound $1.90 ($623580 / 328200 pounds used] Material Price Variance $32,820 U [It is unfavorable as actual price is more than the standard price per pound] [328200 pounds x ($1.80 - $1.90)] Material Quantity Variance = (Standard pounds required - Actual pounds used) x Standard Price per pound Standard pounds required 306,000 (180,000 units x 1.70 pounds] Actual quantity used (pounds) 328,200 Standard price per pound $1.80 Material Quantity Variance $39,960 U [It is unfavorable as actual quantity used is more than the standard quantity required) [(306000 - 328200) pounds x $1.80] Material Spending Variance = Material Price Variance + Material Quantity Variance Material Price Variance Material Quantity Variance Material Spending Variance $32,820 v $39,960 U $7,140 U [$32820 U +$39960 U]

2) Direct Labor Rate Variance = Actual hours used x (Standard rate per hour - Actual rate per hour) NOTE: DLH stands for direct labor hours. Actual direct labor hours worked 225,000 Standard rate per direct labor hour $10.00 Actual rate per direct labor hour $13.70 ($3082500 / 225000 hours] Direct Labor Rate Variance $832,500 U (It is unfavorable as actual rate is more than the standard rate per direct labor hour] [225000 DLHs x ($10.00 - $13.70)] Labor Efficiency Variance = (Actual hours used - Standard hours required) x Standard Rate per hour Standard labor hours allowed 306,000 (180,000 units x 1.70 hours] Actual direct labor hours worked 225,000 Standard rate per direct labor hour $10.00 Direct Labor Efficiency Variance $810,000 F (It is favorable as actual hours used is less than the standard hours required] [(306000 - 225000) DLHs x $10.00] Labor Spending Variance = Labor Rate Variance + Labor Efficiency Variance Direct Labor Rate Variance Direct Labor Efficiency Variance Labor Spending Variance $832,500 U $810,000 F $22,500 U ($832500 U + $810000 F]

3) Actual direct labor hours worked 225,000 Standard VOH rate per labor hour $1.10 Actual VOH rate per labor hour $1.56 [$350000 / 225000 hours) Variable Overhead Rate Variance $102,500 U [It is unfavorable as actual rate is higher than the standard rate per direct labor hour] [225000 DLHs x ($1.10 - $1.56)] Standard labor hours allowed 306,000 [180,000 units X 1.70 hours) Actual direct labor hours worked 225,000 Standard VOH rate per labor hour $1.10 Variable Overhead Efficiency Variance $89,100 F [It is favorable as actual hours used is less than the standard hours required] [(306000 - 225000) DLHs x $1.10] NOTE: Variable Overhead Spending Variance = VOH Rate Variance + VOH Efficiency Variance VOH stands for variable overhead rate; Variable Overhead Rate Variance $102,500 U DLH stands for direct labor hours. Variable Overhead Efficiency Variance $89,100 F Variable Overhead Spending Variance $13,400 U ($102500 U + $89100 F]