Question

Barley Hopp, Inc., manufactures custom-ordered commemorative beer steins. Its standard cost information follows:

	Standard Quantity		Standard Price (Rate)			Standard Unit Cost
Direct materials (clay)	1.70	lbs.	$	1.80	per lb.	$	3.06
Direct labor	1.70	hrs.	$	15.00	per hr.		25.50
Variable manufacturing overhead (based on direct labor hours)	1.70	hrs.	$	1.10	per hr.		1.87
Fixed manufacturing overhead ($338,000.00 ÷ 130,000.00 units)							2.60

Barley Hopp had the following actual results last year:

Number of units produced and sold		135,000
Number of pounds of clay used		238,200
Cost of clay	$	404,940
Number of labor hours worked		180,000
Direct labor cost	$	3,510,000
Variable overhead cost	$	260,000
Fixed overhead cost	$	350,000

2. Calculate the direct labor rate, efficiency, 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 Labor Rate Variance Direct Labor Efficiency Variance Direct Labor Spending Variance 3. Calculate the variable overhead rate, efficiency, and total spending variances for Barley Hopp. (Do not round your intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable/Overapplied and "U" for unfavorable/underapplied.) Variable Overhead Rate Variance Variable Overhead Efficiency Variance Variable Overhead Spending Variance

Answer 1

2)
Direct labor rate variance = actual hours x (actual rate - standard rate) = 180,000 x (19.5 - 15)	$ 810,000.00	U
Actual rate = 3,510,000/180,000 =19.5
Direct labor efficiency variance = standard rate x (actual hours - standard hours given actual output) =  $15 x (180,000 -  229,500)	$ 742,500.00	F
standard hours given actual output = 135,000 x 1.7 hrs	229500
Total Direct Labour Variance = = 810,000 U - 742,500 F	$   67,500.00	U
3)
Variable overhead rate variance = actual variable overhead - (actual hours x standard variable rate)  = $260,000 - (180,000 x 1.10)	$   62,000.00	U
Variable overhead efficiency variance = standard variable rate x (actual hours - standard hours given actual output) = 1.10 x (180,000 - 229,500)	$   54,450.00	F
Total Variable Overhead Variance = 62000 U - 54,450 F	$     7,550.00	U