Barley Hopp, Inc., manufactures custom-ordered commemorative beer steins. Its st

Question

Barley Hopp, Inc., manufactures custom-ordered commemorative beer steins. Its standard cost information follows:

Barley Hopp, Inc., manufactures custom-ordered commemorative beer steins. Its standard cost information follows Standard Quantity 1.70 lbs.$ 1.80 per lb 1.70 hrs. $12.00 per hr. Standard Price Standard Unit Cost $ 3.06 20.40 1.87 (Rate) Direct materials (clay) Direct labor Variable manufacturing overhead (based on 1.70 hrs 1.10 per hr. direct labor hours) Fixed manufacturing overhead ($425,500.00 + 2.30 185,000.00 units) 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 190,000 348,200 $ 661,580 235,000 $3,901,000 $ 370,000 $ 415,000 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 Ul

Explanation / Answer

(1)

Direct Material Price variance

34820(U)

Direct Material Quantity Variance

45360(U)

Direct Material Spending Variance

80180(U)

Direct Material Price variance = (SR – AR) * Actual Qty

SR = 1.80

AR = 661580/348200 = 1.90

Actual Qty = 348200

= (1.80 – 1.90) * 348200 = 34820(U)

Direct Material Quantity Variance = (SQ – AQ) * SR

SQ = 190000 * 1.70 = 323000

(323000 – 348200) * 1.80 = 45360(U)

Direct Material Spending Variance = Direct Material Price variance + Direct Material Quantity Variance

= 34820(U) + 45360(U) = 80180(U)

(2)

Direct Labour Rate Variance

1081000(U)

Direct Labour Efficiency Variance

1056000(F)

Direct Labour Spending Variance

25000(U)

Direct Labour Rate Variance = (SR – AR) * Actual Hrs

SR = 12

AR = 3901000/235000 = 16.6

Actual Hrs = 235000

= (12 – 16.6) * 235000= 1081000(U)

Direct Labour Efficiency Variance = (S Hrs – A Hrs) * SR

S Hrs = 190000 * 1.70 = 323000

(323000 – 235000) * 12= 1056000(F)

Direct Labour Spending Variance = Direct Labour Rate Variance + Direct Labour Efficiency Variance

= 1081000(U) + 1056000(F) = 25000(U)

(3)

V. O/H Rate Variance

111500(U)

V. O/H Efficiency Variance

96800(F)

V. O/H Spending Variance

14700(U)

V. O/H Rate Variance = (SR – AR) * Actual Hrs

SR = 1.10

AR = 370000/235000 = 1.574468

Actual Hrs = 235000

= (1.10 – 1.574468) * 235000= 111500(U)

V. O/H Efficiency Variance = (S Hrs – A Hrs) * SR

S Hrs = 190000 * 1.70 = 323000

(323000 – 235000) * 1.10= 96800(F)

V. O/H Spending Variance = V. O/H Rate Variance + V. O/H Efficiency Variance

= 111500(U) + 96800(F) = 14700(U)

Direct Material Price variance

34820(U)

Direct Material Quantity Variance

45360(U)

Direct Material Spending Variance

80180(U)

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