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): Standard Labor Time Sintering Finishing 0.20 hours Raw Material X442 Product Y661 2.5 kilos 2.5 0.90 Alpha6 liters hours 4.5 kilos 3.5 liters 0.30 1.20 Zeta7 hours hours s Information relating to materials purchased and materials used in production during May follows: Used in Purchase Standard Price Production Material Purchases Cost per 15,000 kilos $39,000 $2.40 kilo X442 9,500 kilos per liter Y661 16,000 liters $20,800 $1.40 14,000 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 $20.00 per hour in Finishing. c. During May, 1,300 direct labor-hours were worked in Sintering at a total labor cost of $30,550, and 2,950 direct labor-hours were worked in Finishing at a total labor cost of $64,900. d. Production during May was 1,600 Alpha6s and 1,300 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.

Answer 1

Paart-1
	Standard		Standard			Standard
	Quantity or Hours		Price or Rate			Cost
Alpha6:
Direct materials-X442	2.5	kilos	2.4		per kilo	$6.00
Direct materials-Y661	2.5	litres	1.4		per litre	$3.50
Direct labor-Sintering	0.2	hours	23		per hour	$4.60
Direct labor-Finishing	0.9	hours	20		per hour	$18.00
Total						$32.10
Zeta7:
Direct materials-X442	4.5	kilos	2.4		per kilo	$10.80
Direct materials-Y661	3.5	litres	1.4		per litre	$4.90
Direct labor-Sintering	0.3	hours	23		per hour	$6.90
Direct labor-Finishing	1.2	hours	20		per hour	$24.00
Total						$46.60

Part-2
Material price variance = [SP-AP] x AQ purchased
Material X442 = [$2.40- $2.60] x 15000 = $3000 U
Material Y661 = [$1.40 - $1.30] x 16000 = $1600 F
Material quantity variance = [SQ-AQ used] x SP
Material X442 = [{(2.5 x 1600) + (4.5 x 1300)} - 9500] x $2.40 = $840F
Material Y661 = [{(2.5 x 1600) + (3.5 x1300)} - 14000] x $1.40 = $7630 U
* X442 Actual Price per Kilos = 39000/15000=$2.60
**Y661, Actual Price Per Litre = 20800/16000=$1.30/ Litre
Direct material variance - Material X442
Material price variance	$3000 U
Material quantity variance	$840F
Direct material variance - Material Y661
Material price variance	$1600F
Material quantity variance	$7630 U

Part-3
3. Direct labor rate variance = [SR-AR] x AH worked
Sintering = [23 - 23.50] x 1300 = $650 U
Finishing = [20 - 22] x 2950 = $5900 U
*Actual Rate/ Hour for Sintering :- $30550/1300=$23.50
**Actual Rate/ Hour for Finishing :- $64900/2950=$22
Direct labor efficiency variance = [SH-AH] x SR
Sintering = [{(0.20 x 1600) + (0.30 x 1300)} - 1300] x $23 = $13570 U
Finishing = [{(0.9 x 1600) + (1.2 x 1300)} - 2950] x $20 = $1000 F
Direct labor variances - Sintering:
Labor rate variance	$650U
Labor efficiency variance	$13570U
Direct labor variances - Finishing:
Labor rate variance	$5900U
Labor efficiency variance	$1000F