Question

Problem 10-10 Multiple Products, Materials, and Processes [LO10-1, LO10-2] 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 Product X442 Y661 Sintering Finishing Alpha6 1.8 kilos 2.0 liters 0.20 hours 0.80 hours Zeta7 3.0 kilos 4.5 liters 0.35 hours 0.90 hours Information relating to materials purchased and materials used in production during May follows: Material Purchases Purchase Cost Standard Price Used in Production X442 14,500 kilos $52,200 $3.50 per kilo 8,500 kilos Y661 15,500 liters $20,925 $1.40 per liter 13,000 liters The following additional information is available: a. The company recognizes price variances when materials are purchased. b. The standard labor rate is $19.80 per hour in Sintering and $19.20 per hour in Finishing. c. During May, 1,200 direct labor-hours were worked in Sintering at a total labor cost of $27,000, and 2,850 direct labor-hours were worked in Finishing at a total labor cost of $59,850. d. Production during May was 1,500 Alpha6s and 2,000 Zeta7s. Requied: 1. Complete the standard cost card for each product, showing the standard cost of direct materials and direct labor. (Round your answers to 2 decimal places.) 2. Compute the materials price and quantity variances for each material. (Input all amounts as positive values. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e, zero variance).) 3. Compute the labor rate and efficiency variances for each operation. (Input all amounts as positive values. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e, zero variance).

Answer 1

		STANDARD QUANTITY PER UNIT
			PRODUCT
			Alpha6	Zeta7
		Raw materials:
		X442(Kilos)	1.8	3.0
		Y661(litres)	2.0	4.5
		Sinterings (Labor hour)	0.20	0.35
		Finishing (Labor hour)	0.80	0.90
		DIRECT MATERIALS:
			X442	Y661
	A	Materials Purchased	14500	15500
	B	Purchase Cost(Actual)	$52,200	$20,925
	C	Standard Price	$3.50	$1.40
	D	Quantity used in production (Actual)	8500	13000
	E=B/A	Actual Price paid	$3.60	$1.35
		DIRECT LABOR:
			Sintering	Finishing
	A	Standard Labor Rate(Per hour)	$19.80	$19.20
	B	Direct labor hours (Actual)	1200	2850
	C	Total Labor Cost(Actual)	$27,000	$59,850
	D=C/B	Actual Labor Rate per hour	$22.50	$21.00
			PRODUCT
			Alpha6	Zeta7
		Actual Quantity Produced	1500	2000
	1	STANDARD COST CARD
		ALPHA 6
		Direct Material cost per unit	$9.10	(X442:(1.8*3.5)+Y661:(1.4*2.0)
		Direct Labor Cost Per Unit	$19.32	(Sintering :(19.8*0.2)+Finishing :(19.2*0.8)
		ZETA 7
		Direct Material cost per unit	$16.80	(X442:(3*3.5)+Y661:(1.4*4.5)
		Direct Labor Cost Per Unit	$24.21	(Sintering :(19.8*0.35)+Finishing :(19.2*0.9)
	2	MATERIAL PRICE AND QUANTITY VARIANCE
	SP1	Standard Price of X442 (per Kilo)	$3.50
	SP2	Standard Price of Y661 (per Liter)	$1.40
	AQ1	Actual Quantity of X442 Purchased	14500
	AQ2	Actual Quantity of Y661 Purchased	15500
	AP1	Actual Price of X442 (per Kilo)	$3.60
	AP2	Actual Price of Y661 (per Liter)	$1.35
		Material Price Variance X442=AQ1*(AP1-SP1)	$1,450.00	(14500*(3.6-3.5)
		Material Price Variance X442=	$1,450.00	Unfavorable (Actual Price is higher than standard
		Material Price Variance Y661=AQ2*(AP2-SP2)	($775.00)
		Material Price Variance X442=	$775.00	Favorable (Actual Price is Less than standard
		Material Price Variance =AQ1*(AP1-SP1)+AQ2*(AP2-SP2)
		Material Price Variance =	$675.00	(14500*(3.6-3.5)+15500*(1.35-1.4)
		Material Price Variance =	$675.00	UNFAVORABLE
	AQ3	Actual Quantity of X442 Used	8500
	AQ4	Actual Quantity of Y661 Used	13000
	SQ3	Standard Quantity of X442 for actual Production	8700	(1500*1.8+2000*3)
	SQ4	Standard Quantity of Y661 for actual Production	12000	(1500*2.0+2000*4.5)
		Material Quantity Variance X442=SP1*(AQ3-SQ3)	$700.00	(3.5*(8500-8700)
		Material Quantity Variance X442	$700.00	Favorable (Actual Quantity is Less than standard
		Material Quantity Variance Y661=SP2*(AQ4-SQ4)	$1,400.00	Unfavorable (Actual Quantity is more than standard
		Material Quantity Variance :SP1*(AQ3-SQ3)+SP2*(AQ4-SQ4)
		Material Quantity Variance =	$700.00	(3.5*(8500-8700)+1.4*(13000-12000)
		Material Quantity Variance =	$700.00	Unfavorable
						3 LABOR RATE AND EFFICIENCY VARIANCE Standard Labor Rate for Sintering $19.80 SR1 $19.20 Standard Labor Rate for Finishing SR2 Standard Labor hour for Sintering SH1 (1500*0.2+2000*0.35) 1000 (1500 0.8+2000*0.9) Standard Labor hour for Finishing SH2 3000 Actual Labor Rate for Sintering $22.50 AR1 $21.00 Actual Labor Rate for Finishing AR2 Actual Labor hour for Sintering АН1 1200 Actual Labor hour for Finishing АН2 2850 Labor Rate Variance SH1*(AR1-SR1)+SH2 * (AR2-SR2) $8,100.00 (1000*(22.50-19.80)+3000*(21-19.20) $8,100.00 Labor Rate Variance = Labor Rate Variance $2,700.00 (1000*(22.50-19.80) $2,700.00 Labor Rate Variance Sintering Labor Rate Variance Sintering Unfavorable (Actual Rate is higher) Labor Rate Variance Finishing $5,400.00 (3000*(21-19.20) $5,400.00 Labor Rate Variance Finishing Unfavorable (Actual Rate is higher) Labor Rate Variance -SH1*(AR1-SR1)+SH2*(AR2-SR2) $8,100.00 (1000*(22.50-19.80)+3000*(21-19.20) $8,100.00 Labor Rate Variance Labor Rate Variance = Labor Rate Variance Sintering $2,700.00 (1000*(22.50-19.80) $2,700.00 Unfavorable (Actual Rate is higher) Labor Rate Variance Sintering Labor Rate Variance Finishing $5,400.00 (3000*(21-19.20) $5,400.00 Labor Rate Variance Finishing Unfavorable (Actual Rate is higher) Labor Efficiency Variance Labor Efficiency Variance Sintering -SR1*(AH1-SH1) Labor Efficiency Variance Sintering = Labor Efficiency Variance Sintering $3,960.00 19.8*(1200-1000) $3,960.00 Unfavorable (Actual Hour is higher) Labor Efficiency Variance Finishing -SR2*(AH2-SH2) $2,880.00 19.2*(2850-3000) $2,880.00 Labor Efficiency Variance Finishing = Labor Efficiency Variance Finishing= Favorable (Actual Hour is Lower)