Question

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 Zeta7 Raw Material X442 Y661 2.0 kilos 3.4 liters 4.0 kilos 5.0 liters Standard Labor Time Sintering Finishing 0.20 hours 0.80 hours 0.25 hours 0.90 hours Information relating to materials purchased and materials used in production during May follows: Material X442 Y661 Purchases 15,900 kilos 16,900 liters Purchase Cost $55,650 $23,660 Standard Price $3.30 per kilo $1.50 per liter Used in Production 10,400 kilos The following additional information is available: a. The company recognizes price variances when materials are purchased. b. The standard labor rate is $22.00 per hour in Sintering and $20.50 per hour in Finishing. c. During May, 1,300 direct labor-hours were worked in Sintering at a total labor cost of $31,720, and 3,040 direct labor-hours were worked in Finishing at a total labor cost of $68,400. d. Production during May was 2,500 Alphabs and 1,400 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

1)

	Standard hours or quantity		Standard Price or Rate		Standard Cost
Alpha6:
Direct materials-X442	2.0	kilos	$3.30	per kilo	$6.6
Direct materials- Y661	3.4	liters	$1.50	per liter	5.1
Direct labor- Sintering	0.20	hours	$22.00	per hour	4.4
Direct labor- Finishing	0.80	hours	$20.50	per hour	16.4
Total					$32.5
Zeta7:
Direct materials-X442	4.0	kilos	$3.30	per kilo	$13.2
Direct materials- Y661	5.0	liters	$1.50	per liter	7.5
Direct labor- Sintering	0.25	hours	$22.00	per hour	5.5
Direct labor- Finishing	0.90	hours	$20.50	per hour	18.45
Total					$44.65

2) Direct Materials Variances- Materials X442:

Actual price= $55650/15900= $3.50

Materials price variance= (Standard price-Actual price)*Actual quantity

= (3.30-3.50)*15900= $3180 U

Standard quantity= (2*2500+4*1400)= 10600

Materials quantity variance= (Standard quantity-Actual quantity)*Standard price

= (10600-10400)*$3.30= $660 F

Direct Materials Variances- Materials Y661:

Actual price= $23660/16900= $1.4

Materials price variance= (Standard price-Actual price)*Actual quantity

= (1.50-1.40)*16900= $1690 F

Standard quantity= (3.4*2500+5*1400)= 15500

Materials quantity variance= (Standard quantity-Actual quantity)*Standard price

= (15500-15800)*$1.50= $450 U

3) Direct Labor Variances- Sintering:

Actual rate= $31720/1300= $24.4

Labor rate variance= (Standard rate-actual rate)*Actual hours

= ($22.0-24.4)*1300= $3120 U

Standard hour= (0.20*2500+0.25*1400)=850

Labor efficiency variance= (Standard hour-Actual hour)*Standard rate

= (850-1300)*$22.0= $9900 U

Direct Labor Variances- Finishing:

Actual rate= $68400/3040= $22.5

Labor rate variance= (Standard rate-actual rate)*Actual hours

= ($20.5-22.5)*3040= $6080 U

Standard hour= (0.80*2500+0.90*1400)= 3260

Labor efficiency variance= (Standard hour-Actual hour)*Standard rate

= (3260-3040)*$20.5= $4510 F