Barley Hopp, Incorporated, manufactures custom-ordered commemorative beer steins. Its standard cost information follows: Standard QuantityStandard Price (Rate)Standard Unit CostDirect materials (clay)1.60pounds$ 1.70per pound$ 2.72Direct labor1.60hours$ 14.00per hour22.40Variable manufacturing overhead (based on direct labor hours)1.60hours$ 1.30per hour2.08Fixed manufacturing overhead ($352,000.00 ÷ 160,000.00 units) 2.20Barley Hopp had the following actual results last year:Number of units produced and sold165,000Number of pounds of clay purchased and used298,200Cost of clay$ 536,760Number of labor hours worked210,000Direct labor cost$ 3,780,000Variable overhead cost$ 320,000Fixed overhead cost$ 355,000Required:Calculate the direct materials price, quantity, and total spending variances for Barley Hopp.Calculate the direct labor rate, efficiency, and total spending variances for Barley Hopp.Calculate the variable overhead rate, efficiency, and total spending variances for Barley Hopp.

The variance is the difference between actual and standard production data. The variances are classified as materials variance, labor variance and overhead variances.Part 1. For direct materials variance, SP = $1.70 per pound SQ = 1.60 * 165,000 = 264,000 pounds AP = 536,760/298,200 = $1.8 per pound AQ = 298,200 pounds Direct materials price variance = (SP - AP) * AQ = (1.70 – 1.80) * 298,200 = $29,820 U Direct materials quantity variance = (SQ - AQ) * SP = (264,000 – 298,200) * 1.70 = $58,140 U Direct materials spending variance = 29,820 U + 58,140 U = $87,960 U Part 2. For direct labor variance, SR = $14 per hour SH = 1.6 * 165,000 = 264,000 AR = 3,780,000 / 210,000 = $18 per hour AH = 210,000 Direct labor rate variance = (SR - AR) * AH = (14 - 18) * 210,000 = $840,000 U Direct labor efficiency variance = (SH - AH) * SR = (264,000 – 210,000) * 14 = $756,000 F Direct labor spending variance = 840,000 U + 756,000 F = $84,000 U Part 3. For variable overhead variance, SR = $1.30 per hour SH = 1.60 * 165,000 = 264,000 AR = 320,000/210,000 = $1.52 per hour AH = 210,000 Variable overhead rate variance = (SR - AR) * AH = (1.30 – 1.52) * 210,000 = $46,200 U Variable overhead efficiency variance = (SH - AH) * SR = (264,000 – 210,000) * 1.30 = $70,200 F Variable overhead spending variance = 46,200 U + 70,200 F = $24,000 F

Answered: Barley Hopp, Incorporated, manufactures…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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	Standard Quantity	Standard Price (Rate)	Standard Unit Cost
Direct materials (clay)	1.60	pounds	$ 1.70	per pound	$ 2.72
Direct labor	1.60	hours	$ 14.00	per hour	22.40
Variable manufacturing overhead (based on direct labor hours)	1.60	hours	$ 1.30	per hour	2.08
Fixed manufacturing overhead ($352,000.00 ÷ 160,000.00 units)					2.20

Number of units produced and sold	165,000
Number of pounds of clay purchased and used	298,200
Cost of clay	$ 536,760
Number of labor hours worked	210,000
Direct labor cost	$ 3,780,000
Variable overhead cost	$ 320,000
Fixed overhead cost	$ 355,000

Required:

Calculate the direct materials price, quantity, and total spending variances for Barley Hopp.
Calculate the direct labor rate, efficiency, and total spending variances for Barley Hopp.
Calculate the variable overhead rate, efficiency, and total spending variances for Barley Hopp.

Definition Definition System of assigning an estimated cost to the product (instead of the actual cost) so that the product cost can be determined well in advance and the pricing of the product can be done on time. Since the actual cost cannot be predicted at the initial stage of the production process, the estimated cost is recorded in the books. Any deviation of the estimated cost of the actual cost is adjusted in the books at the end of the period.

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