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)	1.7	lbs.	$	1.80	per lb.	$	3.06
Direct labor	1.7	hrs.	$	14	per hr.		23.80
Variable manufacturing overhead (based on direct labor hours)	1.7	hrs.	$	1.1	per hr.		1.87
Fixed manufacturing overhead ($456,000 ÷ 190,000 units)							2.40

Barley Hopp had the following actual results last year:

Number of units produced and sold		195,000
Number of pounds of clay used		358,200
Cost of clay	$	680,580
Number of labor hours worked		240,000
Direct labor cost	$	4,680,000
Variable overhead cost	$	380,000
Fixed overhead cost	$	430,000

Required:
1. Calculate the fixed overhead spending variance for Barley Hopp. (Do not round your intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable,"U" for unfavorable.)



2. Calculate the fixed overhead volume variance for Barley Hopp. (Do not round your intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable,"U" for unfavorable.)



3. Calculate the total over- or underapplied fixed manufacturing overhead for Barley Hopp. (Do not round your intermediate calculations.)

Answer 1

1. Calculate the fixed overhead spending variance for Barley Hopp
Budgeted fixed overhead			456000
Less : Actual fixed overhead			430000
Fixed Overhead spending Variance			26000	Favourable
2. Calculate the fixed overhead volume variance for Barley Hopp.
Absorbed fixed overhead			468000	195000*2.4
Less : budgeted fixed overhead			456000	190000*2.4
Fixed Overhead Volume variance			12000	Favourable
3. Calculate the total over- or underapplied fixed manufacturing overhead for Barley Hopp
Actual overhead			430000
Less : budgeted fixed overhead			456000
Over applied overhead			26000