6. PA9-1 Calculating Direct Material, Direct Labor, Variable Overhead Variances

Question

6.

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:

Barley Hopp had the following actual results last year:

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.)



2. Calculate the direct labor rate, efficiency, 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.)



3. Calculate the variable overhead rate, efficiency, and total spending variances for Barley Hopp. (Do not round your intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable/Overapplied and "U" for unfavorable/underapplied.)

Standard Quantity Standard Price (Rate) Standard Unit Cost Direct materials (clay) 1.80 lbs. $ 1.90 per lb. $ 3.42 Direct labor 1.80 hrs. $ 11.00 per hr. 19.80 Variable manufacturing overhead (based on direct labor hours) 1.80 hrs. $ 1.10 per hr. 1.98 Fixed manufacturing overhead ($396,000.00 ÷ 180,000.00 units) 2.20

Explanation / Answer

1. Calculate the direct materials price, quantity, and total spending variances for Barley Hopp

Material price variance = (1.9*338200-676400) = 33820 U

Material quantity variance= (185000*1.8-338200)*1.9 = 9880 U

Material spending variance = (185000*3.42-676400) = 43700 U

2. Calculate the direct labor rate, efficiency, and total spending variances for Barley Hopp.

Direct labour rate variance = (11*230000-3680000) = 1150000 U

Direct labour efficiency variance = (185000*1.80-230000)*11 = 1133000 F

Direct labour spending variance = (185000*19.80-3680000) = 17000 U

3. Calculate the variable overhead rate, efficiency, and total spending variances for Barley Hopp

Variable overhead rate variance = (1.1*230000-360000) =107000 U

Variable overhead efficiency variance = (185000*1.8-230000)*1.1 = 113300 F

Variable overhead spending variance= (185000*1.98-360000) = 6300 F

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