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): Product Alpha 6 Zeta Raw Material X442 661 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 Purchases 14,900 kilos 15,900 liters Purchase Cost $37,250 $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. Complete this question by entering your answers in the tabs below. Req 1 Reg 2 Req3

Answer 1

1. Standard Cost Card

	Standard Quantity or hours		Standard Price or Rate		Standard Cost
Alpha 6
Direct Material - X442	3.00	kilos	$          2.30	per kilo	$      6.90
Direct Material - 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
Zeta 7
Direct Material - X442	5.00	kilos	$          2.30	per kilo	$   11.50
Direct Material - 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

2.
Material Price Variance = (Actual Price - Standard Price) x Actual Quantity Purchased
X442 = ($2.50 - $2.30) x 14900 = $2980 (U)
Actual Price = $37250/14900
Y661 = ($1.20 - $1.30) x 15900 = $1590 (F)
Actual Price = $19080/15900 = $1.20
Total Material Price Variance = $2980 - $1590 = $1390 (U)

Material Quantity Variance = (Actual Quantity Used - Standard Quantity) x Standard Price
X442 = (9400 - 9500) x $2.30 = $230 (F)
Standard Quantity = 1500 x 3 + 1000 x 5 = 9500
Y661 = (13900 - 7000) x $1.30 = $8970 (U)
Standard Quantity = 1500 x 2 + 1000 x 4 = 7000
Total Material Quantity Variance = $8970 - $230 = $8740 (U)

3.
Labor rate variance = (Actual Rate - Standard Rate) x Actual hours
Sintering = ($23.20 - $23) x 1250 = $250 (U)
Actual Rate = $29000/1250 = $23.20
Finishing = ($21.50 - $19.50) x 2940 = $5880 (U)
Actual Rate = $63210/2940 = $21.50
Total Labor rate Variance = $250 + $5880 = $6130 (U)

Labir efficiency Variance = (Actual hours - Standard hours) x Standard rate
Sintering = (1250 - 850) x $23 = $9200 (U)
Standard Hours = 1500 x 0.30 + 1000 x 0.40 = 850
Finishing = (2940 - 3000) x $19.50 = $1170 (F)
Standard Hours = 1500 x 1.20 + 1000 x 1.20 = 3000
Total Labor efficiency variance = $9200 - $1170 = $8030 (U)