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	2.0 kilos	1.5 liters		0.10 hours	0.80 hours
Zeta7	3.0 kilos	2.5 liters		0.45 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	14,800	kilos	$66,600	$4.30	per kilo	9,300	kilos
Y661	15,800	liters	$23,700	$1.60	per liter	13,800	liters

The following additional information is available:

1. The company recognizes price variances when materials are purchased.

2. The standard labor rate is $22.00 per hour in Sintering and $21.00 per hour in Finishing.

3. 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.

4. Production during May was 2,300 Alpha6s and 1,600 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	kilos	$4.30		per kilo	$8.60
Direct materials-Y661	1.5	litres	$1.60		per litre	$2.40
Direct labor-Sintering	0.1	hours	$22.00		per hour	$2.20
Direct labor-Finishing	0.8	hours	$21.00		per hour	$16.80
Total						$30.00
Zeta7:
Direct materials-X442	3	kilos	$4.30		per kilo	$12.90
Direct materials-Y661	2.5	litres	$1.60		per litre	$4.00
Direct labor-Sintering	0.45	hours	$22.00		per hour	$9.90
Direct labor-Finishing	0.9	hours	$21.00		per hour	$18.90
Total						$45.70

Part-2
2. Material price variance = [SP-AP] x AQ purchased
Material X442 = [$4.30 - $4.50] x 14800 = $640 U
Material Y661 = [$1.60 - $1.50] x 15800 = $1580 F
Material quantity variance = [SQ-AQ used] x SP
Material X442 = (((2 x 2300) + (3 x 1600)) - 9300]*4.30 = $430 F
Material Y661 = (((1.5x 2300) + (2.5 x1600) - 13800]*1.60 = $10160 UF
* X442 Actual Price per Kilos = 66600/14800=$4.50
**Y661, Actual Price Per Litre = 23700/15800=$1.50/ Litre
Direct material variance - Material X442
Material price variance	640 U
Material quantity variance	430 F
Direct material variance - Material Y661
Material price variance	1580F
Material quantity variance	10160 UF
Part-3
3. Direct labor rate variance = [SR-AR] x AH worked
Sintering = [22 - 23] x 1220 = $1220U
Finishing = [21 - 23] x 2930 = $5860 U
*Actual Rate/ Hour for Sintering :- $28060/1220=$23
**Actual Rate/ Hour for Finishing :- $67390/2930=$23
Direct labor efficiency variance = [SH-AH] x SR
Sintering = [{(0.10 x 2300) + (0.45 x 1600)} - 1220] x $22 = $5940 U
Finishing = [{(0.80 x 2300) + (0.90 x 1600)} - 2930] x $21 = $7350 F
Direct labor variances - Sintering:
Labor rate variance	1220 U
Labor efficiency variance	5940U
Direct labor variances - Finishing:
Labor rate variance	5860U
Labor efficiency variance	7350F