Question

Problem 10-10 (Algo) Multiple Products, Materials, and Processes [LO10-1, LO10-2] Mickley Corporation produces two products, Alphabs 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 7 Raw Material X442 Y661 2.0 kilos 1.5 liters 3.0 kilos 2.5 liters Standard Labor Time Sintering Finishing 0.10 hours 0.80 hours 0.45 hours 0.90 hours Information relating to materials purchased and materials used in production during May follows: Material X442 Y661 Purchase Purchases Cost 14,800 kilos $66,600 15,800 liters $23,700 Standard Price $4.30 per kilo $1.60 per liter Used in Production 9,300 kilos 13,800 liters 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 $21.00 per hour in Finishing. c. During May, 1,220 direct labor-hours were worked in Sintering at a total labor cost of $28,060, and 2,930 direct labor-hours were worked in Finishing at a total labor cost of $67,390. d. Production during May was 2,300 Alphabs and 1,600 Zeta7s.

Answer 1

Solution:

Direct material variances - X442:

Actual price of material = $66,600 / 14800 = $4.50 per Kg

Material price variance = (SP -AP) *AQ Purchased = ($4.30 - $4.50) * 14800 = $2,960 U

Material Quantity variance = (SQ -AQ) *SP = [(2300*2 + 1600*3) - 9300] * $4.30 = $430 F

Direct material variances - Y661:

Actual price of material = $23,700 / 15800 = $1.50 per Liter

Material price variance = (SP -AP) *AQ Purchased = ($1.60 - $1.50) * 15800 = $1,580 F

Material Quantity variance = (SQ -AQ) *SP = [(2300*1.50 + 1600*2.50) - 13800] * $1.60 = $10,160 U