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    Standard Price
(Rate) Standard
Unit Cost   Direct materials (clay) 1.60 lbs.     $ 1.70 per lb. $ 2.72       Direct labor 1.60 hrs.     $ 12.00 per hr. 19.20       Variable manufacturing overhead
   (based on direct labor hours) 1.60 hrs.     $ 1.10 per hr. 1.76       Fixed manufacturing overhead ($253,000.00

Explanation / Answer

based on actual results:

actual cost of clay per unit = cost/no. of pounds = 333120/208200 = 1.6 per lb

.

material variances:

Direct Materials Price Variance : actual qty( std price per unit - actual price per unit)

= 208200(1.7-1.6) = 20820 favourable

.

Direct Materials Quantity Variance : standard price per unit ( standard qty for actual units - actual qty)

= 1.7[(1.6 * 120000 ) - 208200] = 1.7(192000-208200) = 27540 unfavourable

.

Direct Materials Spending Variance : stndard cost of actual unit - actual cost = 2.72*120000 - 333120

= 326400-333120 = 6720 unfavourable.

.

.

Labour variance:

actual labour rate for clay per unit =labour cost/no. of hrs = 2343000/165000 = 14.2

.

Direct labour rate Variance : actual hrs( std price per hr - actual price per hr)

= 165000(12 - 14.2) = 363000 unfavourable

.

Direct labour efficiency Variance : standard price per hr ( standard hr for actual units - actual hrs)

= 12[(1.6 * 120000 ) - 165000] = 12(192000-165000) = 324000 favourable

.

Direct labour Spending Variance : stndard cost of actual unit - actual cost = 19.20*120000 - 2343000

= 2304000-2343000 = 39000 unfavourable.

.

.

.

variable overhead variance:

actual overhead rate for clay per unit =ovrhead cost/no. of hrs = 230,000/165000 = 1.394

.

Direct v. oh rate Variance : actual hrs( std price per hr - actual price per hr)

= 165000(1.10-1.394) = 48500 unfavourable

.

Direct variable OH efficiency Variance : standard price per hr ( standard hr for actual units - actual hrs)

= 1.10[(1.6 * 120000 ) - 165000] =1.10(192000-165000) = 29700 favourable

.

Direct variable overhead Spending Variance : stndard cost of actual unit - actual cost = 1.76*120000 - 230000

= 211200-230000 = 18800 unfavourable.

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