Question

6.

PA9-1 Calculating Direct Material, Direct Labor, Variable Overhead Variances [LO 9-3, 9-4, 9-5]

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)	1.80	lbs.	$	1.90	per lb.	$	3.42
Direct labor	1.80	hrs.	$	11.00	per hr.		19.80
Variable manufacturing overhead (based on direct labor hours)	1.80	hrs.	$	1.10	per hr.		1.98
Fixed manufacturing overhead ($396,000.00 ÷ 180,000.00 units)							2.20

Barley Hopp had the following actual results last year:

Number of units produced and sold		185,000
Number of pounds of clay used		338,200
Cost of clay	$	676,400
Number of labor hours worked		230,000
Direct labor cost	$	3,680,000
Variable overhead cost	$	360,000
Fixed overhead cost	$	380,000

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.)



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.)



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.)

Answer 1

1. Calculate the direct materials price, quantity, and total spending variances for Barley Hopp

Material price variance = (1.9*338200-676400) = 33820 U

Material quantity variance= (185000*1.8-338200)*1.9 = 9880 U

Material spending variance = (185000*3.42-676400) = 43700 U

2. Calculate the direct labor rate, efficiency, and total spending variances for Barley Hopp.

Direct labour rate variance = (11*230000-3680000) = 1150000 U

Direct labour efficiency variance = (185000*1.80-230000)*11 = 1133000 F

Direct labour spending variance = (185000*19.80-3680000) = 17000 U

3. Calculate the variable overhead rate, efficiency, and total spending variances for Barley Hopp

Variable overhead rate variance = (1.1*230000-360000) =107000 U

Variable overhead efficiency variance = (185000*1.8-230000)*1.1 = 113300 F

Variable overhead spending variance= (185000*1.98-360000) = 6300 F