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 Sintering Product Y661 Finishing X442 Alpha6 Zeta7 1.8 kilos 2.0 liters 0.20 hours 0.80 hours 3.0 kilos 4.5 liters 0.35 hours 0.90 hours Information relating to materials purchased and materials used in production during May follows: Purchase Used in Standard Material Purchases 14,500 kilos 15,500 liters $20,925 Price Production Cost $3.50 per kilo $1.40 per liter 8,500 kilos 13,000 liters $52,200 X442 Y661 The following additional information is available: a. The company recognizes price variances when materials are purchased. b. The standard labor rate is $19.80 per hour in Sintering and $19.20 per hour in Finishing. c. During May, 1,200 direct labor-hours were worked in Sintering at a total labor cost of $27,00O, and 2,850 direct labor-hours were worked in Finishing at a total labor cost of $59,850. d. Production during May was 1,500 Alpha6s and 2,000 Zeta7s Required: 1. Complete the standard cost card for each product, showing the standard cost of direct materials and di rect 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

1)

	Standard Quantity or Hours	Standard Price or Rate	Standard Cost
Alpha6
Direct materials-X442	1.8 Kilos	3.50	6.30
Direct materials-Y661	2.0 Liters	1.40	2.80
Direct labor-Sintering	0.20 Hours	19.80	3.96
Direct labor-Finishing	0.80 Hours	19.20	15.36
Total			28.42
Zeta7
Direct materials-X442	3.0 Kilos	3.50	10.50
Direct materials-Y661	4.5 Liters	1.40	6.30
Direct labor-Sintering	0.35 Hours	19.80	6.93
Direct labor-Finishing	0.90 Hours	19.20	17.28
Total			41.01

2)

Direct Materials Variances—Material X442:
Materials price variance (3.6 - 3.5)8,500	850.00	U
Materials quantity variance (8,500 - 8,700)3.50	700.00	F
Direct Materials Variances—Material Y661:
Materials price variance (1.35 - 1.4)13,000	650.00	F
Materials quantity variance (13,000 - 12,000)1.40	1,400.00	U

3)

Direct Labor Variances—Sintering:
Labor rate variance (19.80 - 22.50)1200	3,240.00	U
Labor efficiency variance (1,000 - 1,200)19.80	3,960.00	U
Direct Labor Variances—Finishing:
Labor rate variance (19.20 - 21)*2850	5,130.00	U
Labor efficiency variance (3,000 - 2,850)19.20	2,880.00	F