Question

PA9-1 (Algo) 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)	1.70	lbs.	$	1.80	per lb.	$	3.06
Direct labor	1.70	hrs.	$	11.00	per hr.		18.70
Variable manufacturing overhead (based on direct labor hours)	1.70	hrs.	$	1.10	per hr.		1.87
Fixed manufacturing overhead ($420,500.00 ÷ 145,000.00 units)							2.90

Barley Hopp had the following actual results last year:

Number of units produced and sold		150,000
Number of pounds of clay used		268,200
Cost of clay	$	455,940
Number of labor hours worked		195,000
Direct labor cost	$	2,827,500
Variable overhead cost	$	290,000
Fixed overhead cost	$	440,000

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.

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, "U" for unfavorable, and "None" for no effect (i.e., zero variance).)

	Direct Materials Price Variance Direct Materials Quantity Variance Direct Materials Spending Variance

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, "U" for unfavorable, and "None" for no effect (i.e., zero variance).)

	Direct Labor Rate Variance Direct Labor Efficiency Variance Direct Labor Spending Variance

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, "U" for unfavorable, and "None" for no effect (i.e., zero variance).)

	Variable Overhead Rate Variance Variable Overhead Efficiency Variance Variable Overhead Spending Variance

Answer 1

Answers

• Workings

Actual DATA for		150000	units
	Quantity (AQ)	Rate (AR)	Actual Cost
Direct Material	268200	$                   1.70	$        455,940.00
Direct labor	195000	$                14.50	$     2,827,500.00
Variable Overhead	195000	$                   1.49	$        290,000.00

Standard DATA for		150000	units
	Quantity (SQ)	Rate (SR)	Standard Cost
	[A]	[B]	[A x B]
Direct Material	( 1.7 lbs x 150000 units)=255000 lbs	$                   1.80	$     459,000.00
Direct labor	( 1.7 hours x 150000 units)=255000 hours	$                11.00	$ 2,805,000.00
Variable Overhead	( 1.7 hours x 150000 units)=255000 hours	$                   1.10	$     280,500.00

• Requirements and calculations

Material Price Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Quantity
(	$                                1.80	-	$                       1.70	)	x	268200
	26820
	Variance		$            26,820.00			Favourable-F
Material Quantity Variance
(	Standard Quantity	-	Actual Quantity	)	x	Standard Rate
(	255000	-	268200	)	x	$                           1.80
	-23760
	Variance		$            23,760.00			Unfavourable-U
Material Spending Variance
(	Standard Cost	-	Actual Cost	)
(	$                   459,000.00	-	$          455,940.00	)
	3060
	Variance		$              3,060.00			Favourable-F
Labor Rate Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Labor Hours
(	$                              11.00	-	$                    14.50	)	x	195000
	-682500
	Variance		$          682,500.00			Unfavourable-U
Labour Efficiency Variance
(	Standard Hours	-	Actual Hours	)	x	Standard Rate
(	255000	-	195000	)	x	$                        11.00
	660000
	Variance		$          660,000.00			Favourable-F
Labor Spending Variance
(	Standard Cost	-	Actual Cost	)
(	$                2,805,000.00	-	$      2,827,500.00	)
	-22500
	Variance		$            22,500.00			Unfavourable-U
Variable Overhead Rate Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Labor Hours
(	$                                1.10	-	$                       1.49	)	x	195000
	-75500
	Variance		$            75,500.00			Unfavourable-U
Variable Overhead Efficiency Variance
(	Standard Hours	-	Actual Hours	)	x	Standard Rate
(	255000	-	195000	)	x	$                           1.10
	66000
	Variance		$            66,000.00			Favourable-F
Variable Overhead Spending Variance
(	Standard Cost	-	Actual Cost	)
(	$                   280,500.00	-	$          290,000.00	)
	-9500
	Variance		$              9,500.00			Unfavourable-U