Question

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: Direct materials (clay) Direct labor Variable manufacturing overhead (based on direct labor hours) Fixed manufacturing overhead ($275,000.00 + 110,000.00 units) Standard Quantity 1.60 lbs. 1.60 hrs. 1.60 hrs. Standard Price (Rate) $ 1.70 per lb. $11.00 per hr. $ 1.10 per hr. Standard Unit Cost $ 2.72 17.60 1.76 2.50 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 Direct labor cost Variable overhead cost Fixed overhead cost 115,000 198,200 $ 317,120 160,000 $2,080,000 $ 220,000 $ 280,000 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.) Direct Materials Price Variance Direct Materials Quantity Variance Direct Materials Spending Variance

Answer 1

Solution

Material Price Variance	$           19,820.00	Favourable-F
Material quantity variance	$         24,140.00	Unfavourable-U
Total Material Variance	$           4,320.00	Unfavourable-U
Labor rate variance	$      320,000.00	Unfavourable-U
Labor Efficiency variance	$      264,000.00	Favourable-F
Total Labor variance	$         56,000.00	Unfavourable-U
Variable Overhead Rate Variance	$         44,000.00	Unfavourable-U
Variable Overhead Efficiency Variance	$         26,400.00	Favourable-F
Variable Overhead Spending Variance	$         17,600.00	Unfavourable-U

Working

Actual DATA for		115000	Units
	Quantity (AQ)	Rate (AR)	Actual Cost
Direct Material	198200	$       1.60	$       317,120.00
Direct labor	160000	$     13.00	$    2,080,000.00
Variable Overhead	160000	$       1.38	$       220,000.00

.

Standard DATA for		115000	Units
	Quantity (SQ)	Rate (SR)	Standard Cost
	[A]	[B]	[A x B]
Direct Material	( 1.6 lbs x 115000 Units)=184000 lbs	$                   1.70	$          312,800.00
Direct labor	( 1.6 Hour x 115000 Units)=184000 Hour	$                11.00	$      2,024,000.00
Variable Overhead	( 1.6 Hour x 115000 Units)=184000 Hour	$                   1.10	$          202,400.00

.

Material Price Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Quantity
(	$                    1.70	-	$                     1.60	)	x	198200
	19820
	Variance		$           19,820.00			Favourable-F
Material Quantity Variance
(	Standard Quantity	-	Actual Quantity	)	x	Standard Rate
(	184000	-	198200	)	x	$              1.70
	-24140
	Variance		$           24,140.00			Unfavourable-U
Material Spending Variance
(	Standard Cost	-	Actual Cost	)
(	$       312,800.00	-	$        317,120.00	)
	-4320
	Variance		$             4,320.00			Unfavourable-U
Labor Rate Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Labor Hours
(	$                  11.00	-	$                   13.00	)	x	160000
	-320000
	Variance		$        320,000.00			Unfavourable-U
Labour Efficiency Variance
(	Standard Hours	-	Actual Hours	)	x	Standard Rate
(	184000	-	160000	)	x	$           11.00
	264000
	Variance		$        264,000.00			Favourable-F
Labor Spending Variance
(	Standard Cost	-	Actual Cost	)
(	$   2,024,000.00	-	$     2,080,000.00	)
	-56000
	Variance		$           56,000.00			Unfavourable-U
Variable Overhead Rate Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Labor Hours
(	$                    1.10	-	$                     1.38	)	x	160000
	$       (44,000.00)
	Variance		$           44,000.00			Unfavourable-U
Variable Overhead Efficiency Variance
(	Standard Hours	-	Actual Hours	)	x	Standard Rate
(	184000	-	160000	)	x	$              1.10
	$         26,400.00
	Variance		$           26,400.00			Favourable-F
Variable Overhead Spending Variance
(	Standard Cost	-	Actual Cost	)
(	$       202,400.00	-	$        220,000.00	)
	-17600
	Variance		$           17,600.00			Unfavourable-U