Question

Problem 10-10 (Algo) 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): Product Alpha 6 Zeta Raw Material X442 7661 2.5 kilos 2.5 liters 4.5 kilos 4.0 liters Standard Labor Time Sintering Finishing 0.20 hours 0.80 hours 0.40 hours 1.20 hours Information relating to materials purchased and materials used in production during May follows: Material X442 7661 Purchase Purchases Cost 15,800 kilos $53, 720 16.900 liters $21,840 Standard Price $3.20 per kilo $1.40 per liter Used in Production 10,300 kilos 14, 800 liters The following additional information is available: a. The company recognizes price variances when materials are purchased. b. The standard labor rate is $23.00 per hour in Sintering and $22.00 per hour in Finishing. c. During May, 1,380 direct labor-hours were worked in Sintering at a total labor cost of $34,500, and 3,030 direct labor-hours were worked in Finishing at a total labor cost of $72.720. d. Production during May was 2,400 Alphabs and 1,000 Zeta 7s. 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.

Answer 1

1.

	Standard Quantity or Hours		Standard Price or Rate		Standard Cost
Alpha6:
Direct materials-X442	2.5	kilos	3.20	per kilo	8.00
Direct materials-Y661	2.5	liters	1.40	per liter	3.50
Direct labor-Sintering	0.20	hours	23.00	per hour	4.60
Direct labor-Finishing	0.80	hours	22.00	per hour	17.60
Total $					33.70
Zeta7:
Direct materials-X442	4.5	kilos	3.20	per kilo	14.40
Direct materials-Y661	4.0	liters	1.40	per liter	5.60
Direct labor-Sintering	0.40	hours	23.00	per hour	9.20
Direct labor-Finishing	1.20	hours	22.00	per hour	26.40
Total $					55.60

2.

Direct Materials Variances-Material X442:
Materials price variance	$       3,160	U
Materials quantity variance	$           640	F
Direct Materials Variances-Material Y661:
Materials price variance	$       1,680	F
Materials quantity variance	$       6,720	U

Working:

X442: Price variance										X442: Quantity variance
Actual Cost														Standard Cost
AQP	x	AP		AQP	x	SP				AQ	x	SP		SQ	x	SP
15800	x	3.40		15800	x	3.20				10300	x	3.20		10500	x	3.20
			53720				50560						32960				33600
							3160										-640
										SQ = (2400 x 2.5) + (1000 x 4.5) = 6000 + 4500 = 10500
Y661: Price variance										Y661: Quantity variance
Actual Cost														Standard Cost
AQP	x	AP		AQP	x	SP				AQ	x	SP		SQ	x	SP
16800	x	1.30		16800	x	1.40				14800	x	1.40		10000	x	1.40
			21840				23520						20720				14000
							-1680										6720
										SQ = (2400 x 2.5) + (1000 x 4.0) = 6000 + 4000 = 10000

3.

Direct Labor Variances-Sintering:
Labor rate variance	$       2,760	U
Labor efficiency variance	$     11,500	U
Direct Labor Variances-Finishing:
Labor rate variance	$       6,060	U
Labor efficiency variance	$       1,980	F

Working:

Sintering:
Actual Cost								Standard Cost
AH	x	AR		AH	x	SR		SH	x	SR
1380	x	25.00		1380	x	23.00		880	x	23.00
			34500				31740				20240
							2760				11500
SH = (2400 x 0.20) + (1000 x 0.40) = 480 + 400 = 880
Finishing:
Actual Cost								Standard Cost
AH	x	AR		AH	x	SR		SH	x	SR
3030	x	24.00		3030	x	22.00		3120	x	22.00
			72720				66660				68640
							6060				-1980
SH = (2400 x 0.80) + (1000 x 1.20) = 1920 + 1200 = 3120