Question

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	2.5 kilos	2.5 liters		0.20 hours	0.90 hours
Zeta7	4.5 kilos	3.5 liters		0.30 hours	1.20 hours

  

Information relating to materials purchased and materials used in production during May follows:

  

Material	Purchases	Purchase Cost	Standard Price		Used in Production
X442	15,000 kilos	$39,000	$2.40	per kilo	9,500	kilos
Y661	16,000 liters	$20,800	$1.40	per liter	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.
	Production during May was 1,600 Alpha6s and 1,300 Zeta7s. 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).) Direct Materials Variances—Material X442: Materials price variance $3,000 U Materials quantity variance $16,200 F Direct Materials Variances—Material Y661: Materials price variance $1,600 F Materials quantity variance $12,000 U

Answer 1

• Question has asked regarding Material Price & Quantity Variances of both the materials
• Material X 442

--Working

Material - X442
Working		Alpha6	Zeta7	Total
A	Actual units produced	1,600	1,300
B	Standard material per unit	2.5	4.5
C = A x B	Standard Quantity (SQ) of material	4,000	5,850	9,850 kilos

Actual DATA
	Quantity (AQ)	Rate (AR)	Actual Cost
Direct Material	9500 kgs used	$              2.60 [39000/15000]	$           24,700.00

Standard DATA
	Quantity (SQ)	Rate (SR)	Standard Cost
Direct Material	9850 kgs (calculated above)	$                2.40	$           23,640.00

--Answer: Variances asked

Material Price Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Quantity purchased
(	$                        2.40	-	$                       2.60	)	x	15000 kgs
	-3000
	Variance		$              3,000 [Correctly calculated by you]			Unfavourable-U

Material Quantity Variance
(	Standard Quantity	-	Actual Quantity	)	x	Standard Rate
(	9850	-	9500	)	x	$                           2.40
	840
	Variance		$                  840.00			Favourable-F

• Material Y661

Material - Y661
Working		Alpha6	Zeta7	Total
A	Actual units produced	1,600	1,300
B	Standard material per unit	2.5	3.5
C = A x B	Standard Quantity (SQ) of material	4,000	4,550	8,550 litres

Actual DATA
	Quantity (AQ)	Rate (AR)	Actual Cost
Direct Material	14000	$              1.30	$           18,200.00

Standard DATA
	Quantity (SQ)	Rate (SR)	Standard Cost
Direct Material	8550 ltres	$                1.40	$           11,970.00

Answers: Variances asked

Material Price Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Quantity purchased
(	$                        1.40	-	$                       1.30	)	x	16000
	1600
	Variance		$              1,600.00			Favourable-F

Material Quantity Variance
(	Standard Quantity	-	Actual Quantity	)	x	Standard Rate
(	8550	-	14000	)	x	$                           1.40
	-7630
	Variance		$              7,630.00			Unfavourable-U

• All Answers summarised

irect Materials Variances—Material X442:
Materials price variance	$3,000	U
Materials quantity variance	$ 840	F
Direct Materials Variances—Material Y661:
Materials price variance	$1,600	F
Materials quantity variance	$ 7,630	U