Question

Problem 9-21 Multiple Products, Materials, and Processes [LO9-4, LO9-5] Mickley Corporation produces two products, Alpha6s and Zeta7s, which pass through two operations, Sintering and Finishing. Each of the products uses two raw materials-X442 and Y661. The company uses a standard cost system, with the following standards for each product (on a per unit basis): Raw Material Standard Labor Time Sintering Product X442 Y661 Finishing Alpha6 1.8 kilos 2.4 liters 0.20 hours 1.20 hours Zeta7 4.4 kilos 4.4 liters 0.40 hours 0.80 hours Information relating to materials purchased and materials used in production during May follows: Purchase Standard Used in Material Purchases Cost Price Production 9,600 kilos 14,100 1iters X442 15,100 kilos 16,100 liters $40,770 $22,540 $2.50 per kilo Y661 $1.50 per liter The following additional information is available: a. The company recognizes price variances when materials are purchased. b. The standard labor rate is $22.00 per hour in Sintering and $21.50 per hour in Finishing. c. During May, 1,300 direct labor-hours were worked in Sintering at a total labor cost of $30,680, and 2,960 direct labor-hours were worked in Finishing at a total labor cost of $69,560. d. Production during May was 1,700 Alpha6s and 1,550 Zeta7s. Required: 1. Complete the standard cost card for each product, showing the standard cost of direct materials and direct labor 2. Compute the materials price and quantity variances for each material 3. Compute the labor rate and efficiency variances for each operation

How do you solve for 1, 2, and 3? What are the answers to these questions?

Answer 1

	Standard Quantity or hours		Standard Price or Rate		Standard Cost
Alpha 6
Direct Material - X442	1.80	kilos	$        2.50	per kilo	$      4.50
Direct Material - Y661	2.40	liters	$        1.50	per liter	$      3.60
Direct Labor - Sintering	0.20	hours	$      22.00	per hour	$      4.40
Direct Labor - Finishing	1.20	hours	$      21.50	per hour	$   25.80
Total					$   38.30
Zeta 7
Direct Material - X442	4.40	kilos	$        2.50	per kilo	$   11.00
Direct Material - Y661	4.40	liters	$        1.50	per liter	$      6.60
Direct Labor - Sintering	0.40	hours	$      22.00	per hour	$      8.80
Direct Labor - Finishing	0.80	hours	$      21.50	per hour	$   17.20
Total					$   43.60

Product X442
Direct Material price Variance = (Actual Price - Standard Price) x Actual Quantity Purchased
= ($2.70 - $2.50) x 15100 = $3020 (U)
Actual Price = $40770/15100 = $2.70

Direct Material Quantity Variance = (Actual Quantity - Standard Quantity) x Standard Price
= (9600 - 9880) x $2.50 = $700 (F)
Standard Quantity = 1700 x 1.80 + 1550 x 4.40 = 9880

Product Y661
Direct Material price Variance = (Actual Price - Standard Price) x Actual Quantity Purchased
= ($1.40 - $1.50) x 16100 = $1610 (F)
Actual price = $22540/16100 = $1.40

Direct Material Quantity Variance = (Actual Quantity - Standard Quantity) x Standard Price
= (14100 - 10900) x $1.50 = $4800 (U)
Standard Quantity = 1700 x 2.40 + 1550 x 4.40 = 10900

Direct Labor Variances - Sintering
Labor rate Variance = (Actual Rate - Standard Rate) x Actual hours
= ($23.60 - $22) x 1300 = $2080 (U)
Actual Rate = $30680/1300 = $23.60

Labor Efficiency Variance = (Actual hours - Standard hours) x Standard Rate
= (1300 - 960) x $22 = $7480 (U)
Standard hours = 1700 x 0.20 + 1550 x 0.40 = 960

Direct Labor Variances - Finishing
Labor rate Variance = (Actual Rate - Standard Rate) x Actual hours
= ($23.50 - $21) x 2960 = $5920 (U)
Actual Rate = $69560/2960 = $23.50

Labor Efficiency Variance = (Actual hours - Standard hours) x Standard Rate
= (2960 - 3280) x $21.50 = $6880 (F)
Standard hours = 1700 x 1.20 + 1550 x 0.80 = 3280