Question

Problem 9-21 Multiple Products, Materials, and Processes (LO9-4, LO9-5] 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 7661 3.0 kilos 2.0 liters 5.0 kilos 4.0 liters Standard Labor Time Sintering Finishing 0.30 hours 1.20 hours 0.40 hours 1.20 hours Information relating to materials purchased and materials used in production during May follows: Material X442 Y661 Purchase Purchases Cost 14,900 kilos $37,250 15,900 liters $19,080 Standard Price $2.30 per kilo $1.30 per liter Used in Production 9,400 kilos 13,900 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 $19.50 per hour in Finishing. c. During May, 1,250 direct labor-hours were worked in Sintering at a total labor cost of $29,000, and 2,940 direct labor-hours were worked in Finishing at a total labor cost of $63,210. d. Production during May was 1,500 Alphabs and 1,000 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

Solution 1:

	Standard Quantity or Hours		Standard Price or Rate		Standard Cost
Alpha6:
Direct materials-X442	3.00	kilos	2.30	per kilo	6.90
Direct materials-Y661	2.00	liters	1.30	per liter	2.60
Direct labor-Sintering	0.30	hours	23.00	per hour	6.90
Direct labor-Finishing	1.20	hours	19.50	per hour	23.40
Total					39.80
Zeta7:
Direct materials-X442	5.00	kilos	2.30	per kilo	11.50
Direct materials-Y661	4.00	liters	1.30	per liter	5.20
Direct labor-Sintering	0.40	hours	23.00	per hour	9.20
Direct labor-Finishing	1.20	hours	19.50	per hour	23.40
Total					49.30

Solution 2:

Direct Materials Variances
Direct Materials Variances-Material X442:
Materials price variance	$2,980	U
Materials quantity variance	$230	F
Direct Materials Variances-Material Y661:
Materials price variance	$1,590	F
Materials quantity variance	$8,970	U

Working:

Material X442: Price Variance
Actual Cost (Purchased)				Standard cost for actual quantity
AQ	*	AP		AQ	*	SP
14900	*	$2.50		14900	*	$2.30
	$37,250				$34,270
			$2,980	U
Material X442: Quantity Variance
Standard cost for actual quantity (Used)				Standard Cost
AQ	*	SP		SQ	*	SP
9400	*	$2.30		9500	*	$2.30
	$21,620				$21,850
			$230	F

Material Y661: Price Variance
Actual Cost (Purchased)				Standard cost for actual quantity
AQ	*	AP		AQ	*	SP
15900	*	$1.20		15900	*	$1.30
	$19,080				$20,670
			$1,590	F
Material Y661: Quantity Variance
Standard cost for actual quantity (Used)				Standard Cost
AQ	*	SP		SQ	*	SP
13900	*	$1.30		7000	*	$1.30
	$18,070				$9,100
			$8,970	U

Solution 3:

Direct Labor Variances
Direct Labor Variances-Sintering:
Labor rate variance	$250	U
Labor efficiency variance	$1,150	U
Direct Labor Variances-Finishing:
Labor rate variance	$5,880	U
Labor efficiency variance	$1,170	F

Working:

Sintering: Direct Labor Variances
Actual Cost				Standard cost for actual quantity				Standard Cost
AH	*	AR		AH	*	SR		SH	*	SR
1250	*	$23.20		1250	*	$23.00		1200	*	$23.00
	$29,000				$28,750				$27,600
			$250	U			$1,150	U
Finishing: Direct Labor Variances
Actual Cost				Standard cost for actual quantity				Standard Cost
AH	*	AR		AH	*	SR		SH	*	SR
2940	*	$21.50		2940	*	$19.50		3000	*	$19.50
	$63,210				$57,330				$58,500
			$5,880	U			$1,170	F