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	1.5 kilos	2.5 liters		0.20 hours	0.90 hours
Zeta7	3.5 kilos	3.5 liters		0.35 hours	0.80 hours

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

Material	Purchases		Purchase Cost	Standard Price		Used in Production
X442	14,700	kilos	$64,680	$4.20	per kilo	9,200	kilos
Y661	15,700	liters	$23,550	$1.60	per liter	13,700	liters

The following additional information is available:

The company recognizes price variances when materials are purchased.

The standard labor rate is $22.00 per hour in Sintering and $20.50 per hour in Finishing.

During May, 1,200 direct labor-hours were worked in Sintering at a total labor cost of $27,840, and 2,920 direct labor-hours were worked in Finishing at a total labor cost of $65,700.

Production during May was 2,200 Alpha6s and 1,700 Zeta7s.

Required:

2. Compute the materials price and quantity variances for each material.

3. Compute the labor rate and efficiency variances for each operation.

Req 1

Req 2

Req 3

Compute the materials price and quantity variances for each material. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)

Direct Materials Variances—Material X442: Materials price variance Materials quantity variance Direct Materials Variances—Material Y661: Materials price variance Materials quantity variance Req 1 Req 2 Req 3 Compute the labor rate and efficiency variances for each operation. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.) Direct Labor Variances—Sintering: Labor rate variance Labor efficiency variance Direct Labor Variances—Finishing: Labor rate variance Labor efficiency variance

Answer 1

Summary of Data for Variance Calculation
	Budgeted			Standard for Actual Output			Actual
	Unit	Rate	Total	Unit	Rate	Total	Unit	Rate	Total
Material- X442- Purchase	5	4.20	21.00	14,700	4.20	61,740	14,700	4.40	64,680
Material- Y661- Purchase	6	1.60	9.60	15,700	1.60	25,120	15,700	1.50	23,550
Labour-Sintering	0.55	22.00	12.10	1,210	22.00	26,620	1,200	23.20	27,840
Labour- Finishing	1.70	20.50	34.85	2,890	20.50	59,245	2,920	22.50	65,700
Material- X442- Quantity				9,250	4.20	38,850	9,200	4.40	40,480
Material- Y661- Quantity				11,450	1.60	18,320	13,700	1.50	20,550

Direct Materials Variances—Material X442:
Material price Variance=	(SP-AP)*AQ	(4.2-4.4)*14700	2,940	U
Material Quantity Variance=	(SQ-AQ)*Sp	(9250-9200)*4.2	210	F
Direct Materials Variances—Material Y661:
Material price Variance=	(SP-AP)*AQ	(1.6-1.5)*15700	1,570	F
Material Quantity Variance=	(SQ-AQ)*Sp	(11450-13700)*1.60	3,600	U

Direct Labor Variances—Sintering:
Labour Rate Variance	(SR-AR)*AH	(22-23.20)*1200	1,440	U
Labour Quantity Variance	(SH-AH)*SR	(1210-1200)*22	220	F
Direct Labor Variances—Finishing:
Labour Rate Variance	(SR-AR)*AH	(20.50-22.50)*2920	5,840	U
Labour Quantity Variance	(SH-AH)*SR	(2890-2920)*20.50	615	U

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