Question

Barley Hopp, Inc., manufactures custom-ordered commemorative beer steins. Its standard cost information follows: Standard Standard Price Standard Quantity 1.60 lbs. (Rate) $ 1.70 per lb. $16.00 per hr. Unit Cost Direct materials (clay) 2.72 Direct labor 1,60 hrs. 25.60 Variable manufacturing overhead (based on direct labor hours) Fixed manufacturing overhead ($364,500.00 135,000.00 units) 1.20 per hr 1.60 hrs 1.92 2,70 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 140,000 248,200 $ 397,120 185,000 $3,626,000 $ 270,000 $ 380,000 Direct labor cost Variable overhead cost Fixed overhead cost Required: 1. Calculate the direct materials price, quantity, 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 Materials Price Variance Direct Materials Quantity Variance Direct Materials Spending Variance

Answer 1

Solution

Material Price Variance	$         24,820.00	Favourable-F
Material quantity variance	$         41,140.00	Unfavourable-U
Total Material Variance	$         16,320.00	Unfavourable-U
Labor rate variance	$      666,000.00	Unfavourable-U
Labor Efficiency variance	$      624,000.00	Favourable-F
Total Labor variance	$         42,000.00	Unfavourable-U
Variable Overhead Rate Variance	$         48,000.00	Unfavourable-U
Variable Overhead Efficiency Variance	$         46,800.00	Favourable-F
Variable Overhead Spending Variance	$           1,200.00	Unfavourable-U

Working

Actual DATA for		140000	Units
	Quantity (AQ)	Rate (AR)	Actual Cost
Direct Material	248200	$       1.60	$       397,120.00
Direct labor	185000	$     19.60	$    3,626,000.00
Variable Overhead	185000	$       1.46	$       270,000.00

.

Standard DATA for		140000	Units
	Quantity (SQ)	Rate (SR)	Standard Cost
	[A]	[B]	[A x B]
Direct Material	( 1.6 lbs x 140000 Units)=224000 lbs	$                   1.70	$          380,800.00
Direct labor	( 1.6 Hour x 140000 Units)=224000 Hour	$                16.00	$      3,584,000.00
Variable Overhead	( 1.6 Hour x 140000 Units)=224000 Hour	$                   1.20	$          268,800.00

.

Material Price Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Quantity
(	$                    1.70	-	$                     1.60	)	x	248200
	24820
	Variance		$           24,820.00			Favourable-F
Material Quantity Variance
(	Standard Quantity	-	Actual Quantity	)	x	Standard Rate
(	224000	-	248200	)	x	$              1.70
	-41140
	Variance		$           41,140.00			Unfavourable-U
Material Spending Variance
(	Standard Cost	-	Actual Cost	)
(	$       380,800.00	-	$        397,120.00	)
	-16320
	Variance		$           16,320.00			Unfavourable-U
Labor Rate Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Labor Hours
(	$                  16.00	-	$                   19.60	)	x	185000
	-666000
	Variance		$        666,000.00			Unfavourable-U
Labour Efficiency Variance
(	Standard Hours	-	Actual Hours	)	x	Standard Rate
(	224000	-	185000	)	x	$           16.00
	624000
	Variance		$        624,000.00			Favourable-F
Labor Spending Variance
(	Standard Cost	-	Actual Cost	)
(	$   3,584,000.00	-	$     3,626,000.00	)
	-42000
	Variance		$           42,000.00			Unfavourable-U
Variable Overhead Rate Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Labor Hours
(	$                    1.20	-	$                     1.46	)	x	185000
	$       (48,000.00)
	Variance		$           48,000.00			Unfavourable-U
Variable Overhead Efficiency Variance
(	Standard Hours	-	Actual Hours	)	x	Standard Rate
(	224000	-	185000	)	x	$              1.20
	$         46,800.00
	Variance		$           46,800.00			Favourable-F
Variable Overhead Spending Variance
(	Standard Cost	-	Actual Cost	)
(	$       268,800.00	-	$        270,000.00	)
	-1200
	Variance		$             1,200.00			Unfavourable-U