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)	1.6	lbs.	$	1.70	per lb.	$	2.72
Direct labor	1.6	hrs.	$	16	per hr.		25.60
Variable manufacturing overhead (based on direct labor hours)	1.6	hrs.	$	1.3	per hr.		2.08
Fixed manufacturing overhead ($374,000 ÷ 170,000 units)							2.20

Barley Hopp had the following actual results last year:

Number of units produced and sold		175,000
Number of pounds of clay used		318,200
Cost of clay	$	572,760
Number of labor hours worked		220,000
Direct labor cost	$	4,510,000
Variable overhead cost	$	340,000
Fixed overhead cost	$	380,000

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. Fixed overhead spending variance = Budgeted fixed overhead - Actual fixed overhead

= $374,000 - $380,000 = $6,000 Unfavorable

2. Fixed overhead volume variance = (Actual units produced x Standard rate) - (Budgeted units x Standard rate)

= (175,000 x $2.20) - (170,000 x $2.20) = $11,000 Favorable

3. Applied fixed overhead = Actual units produced x Standard fixed overhead rate

= 175,000 x $2.20 = $385,000

Actual fixed overhead = $380,000

Over-applied fixed overhead = $385,000 - $380,000 = $5,000