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	1.8 kilos	2.0 liters		0.20 hours	0.80 hours
Zeta7	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:

Material	Purchases		Purchase Cost	Standard Price		Used in Production
X442	14,500	kilos	$52,200	$3.50	per kilo	8,500	kilos
Y661	15,500	liters	$20,925	$1.40	per liter	13,000	liters

The following additional information is available:

1. The company recognizes price variances when materials are purchased.

2. The standard labor rate is $19.80 per hour in Sintering and $19.20 per hour in Finishing.

3. During May, 1,200 direct labor-hours were worked in Sintering at a total labor cost of $27,000, and 2,850 direct labor-hours were worked in Finishing at a total labor cost of $59,850.

4. 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 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

Part 1 standard Quantity or hours standard price or rate standard cost c a*b b a Alpha 6: 1.80 Kilos 2.00 liters 0.20 hours 0.80 hours 3.50 per kilos 1.40 per liters 19.80 per hour 19.20 per hour Direct material - X442 6.30 Direct material - Y661 2.80 Direct-Sintering 3.96 Direct- Finis hing 15.36 Total 28.42 Zeta 7: 3.00 Kilos 4.50 iters 0.35 hours 0.90 hours 3.50 per kilos 1.40 per liters 19.80 per hour 19.20 per hour Direct material - X442 10.50 Direct material - Y661 6.30 Direct- Sintering Direct- Finishing 6.93 17.28 Total 41.01

Part 2: DIRECT MATERIAL - X442 quantity RATE per unit TOTAL STANDARD 30,450.00 8,700.00 3.50 (1500* 1.8+2000*3) ACTUAL 8,500 3.60 30,600.00 52200/14500 material Purchase price varian ce (SP- AP) *QP (3.5-3.6)*14500 (SQ - AQ)X SP (8700-8500)*3.5 1430 U 700 F material QUANTITY varia nce DIRECT MATERIAL - Y661 RATE per unit TOTAL quantity STANDARD 12,000.00 1.40 16,800.00 (1500* 2+2000*4.5) ACTUAL 13,000 20925/15500 17,550.00 1.35 material price varian ce material QUANTITY varia nce (SP- AP) *QP(1.4-1.35) *15500 (SQ - AQ)X SP (12000-13000)*1.4 765 F 1,400 U

Part 3: DIRECT LABOUR- Sintering hours total rate STANDARD 1,000.00 19,800.00 19.80 (1500*0.2+2000*0.35) АCTUAL 1200 27000/1200 22.50 27,000.00 LABOUR RATE VARIAN CE LABOUR EFFICIANCY VARIANCE (SH - AH) X SR |(SR - AR) XAH (19.8-22.5)*1200 3,240 U (1000-1200)* 19.83,960 U DIRECT LABOUR- finishing hours total ra te STANDARD 3,000.00 57,600.00 19.20 (1500*0.8+2000*0.9) ACTUAL 2850 59850/2850 21.00 59,850.00 (19.2-21) 2850 (3000-2850)*19.22,880 F LABOUR RATE VARIAN CE (SR - AR)XAH LABOUR EFFICIAN CY VARIANCE (SH - AH) X SR 5,130 U QP AQ SP AP SQ QTY PURCHASED ACTUAL QTY STANDARD PRICE ACTUAL PRICE STANDARD QTY STANDARD RATE ACTUAL RATE STANDARD HOURS ACTUAL HOURS SR AR SH |АН