Question

Barley Hopp, Inc., manufactures custom-ordered commemorative beer steins. Its standard cost information follows: Standard Quantity 1.70 lbs 1.70 hrs. Standard Price (Rate) $ 1.8e per lb. $10.00 per hr. Standard Unit Cost $ 3.06 17.00 Direct materials (clay) Direct labor Variable manufacturing overhead (based on direct labor hours) Fixed manufacturing overhead ($346,500.00 165,808.88 units) 1.70 hrs. $ 1.40 per hr. 2.38 2.10 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 178,000 308, 280 $ 585.580 215,000 $2,795.000 $ 330.asa $ 340, Required: 1. Calculate the direct materials price, quantity, and total spending variances for Barley Hopp. 2. Calculate the direct labor rate, efficiency, and total spending variances for Barley Hopp. 3. Calculate the variable overhead rate, efficiency, and total spending variances for Barley Hopp.

Answer 1

1) Direct Material Variances:

DM price variance = actual cost - (standard rate*actual DM used)

DM price variance = 585580 - (1.80*308200) = 30820 U

DM quantity variance = (DM usage at standard norms for prod.* standard rate) - (actual usage * Standard rate)

DM quantity variance = (170000 * 1.7 * 1.80) - (308200 * 1.80)= 34560 U

DM spending variance = DM price variance + DM quantity variance

DM spending variance = 30820U + 34560U = 65380 U

2) Direct Labor Variances:

DL rate variance = actual cost - (standard rate*actual Labor hours used)

DL rate variance = 2795000 - (10*215000) = 645000 U

DL efficiency variance = (Lab. hours usage at standard norms for prod. * standard rate) - (actual hours * Standard rate)

DL efficiency variance = (170000 * 1.7 * 10) - (215000 * 10)= 740000 F

DL spending variance = DL Rate variance + DL efficiency variance

DL spending variance = 645000U + 740000F= 95000 F

3) Variable overhead Variances:

VO rate variance = actual cost - (standard rate*actual Labor hours used)

VO rate variance = 330000 - (1.40*215000) = 29000 U

VO efficiency variance = (Lab. hours usage at standard norms for prod. * standard rate) - (actual hours * Standard rate)

VO efficiency variance = (170000 * 1.7 * 1.40) - (215000 * 1.40)= 103600 F

VO spending variance = VO Rate variance + VO efficiency variance

VO spending variance = 29000U + 103600F= 74600 F