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 zetat Raw Material X442 Y561 3.0 kilos 2.0 liters 5.0 kilos 5.2 liters Standard Labor Time Finishing 2.40 hours 1.00 hours 2.se hours 1.20 hours Information relating to materials purchased and materials used in production during May follows: Material X442 7661 Purchases 15,780 kilos 16,700 liters Purchase Cost $51,810 $20,040 Standard Price $3.10 per kilo $1.30 per liter Used in Production 10,200 kilos 14,700 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 $21.50 per hour in Finishing c. During May, 1.450 direct labor hours were worked in Sintering at a total labor cost of $35,090, and 3,020 direct labor-hours were worked in Finishing at a total labor cost of $70.970. d. Production during May was 2.300 Alphabs and 700 Zeta 7s.

Answer 1

Solution :

(1)

(a) Calculation of Standard Direct Materials:

*Direct Material X442:

For Alpha product = 3 kilos per unit X 2300 units = 6900 kilos

For Zeta product = 5 kilos per unit X 700 units = 3500 kilos

Total Standard Quantity of Material X442 = 10400 kilos

*Direct Material Y661:

For Alpha product = 2 litres per unit X 2300 units = 4600 litres

For Zeta product = 5 litrel per unit X 700 units = 3500 litres

Total Standard Quantity of Material Y661= 8100 litres

(b) Calculation of Standard Direct Labour hours:

*Direct Labor-Sintering:

For Alpha product = 0.40 hrs per unit X 2300 units = 920 hrs

For Zeta product = 0.50 hrs per unit X 700 units = 350 hrs

Total Standard hours of Sintering Labor = 1270 hrs

*Direct Labor Finishing :

For Alpha product = 1 hr per unit X 2300 units = 2300 hrs

For Zeta product = 1.2 hr per unit X 700 units = 840 hrs

Total Standard hours of Finishing Labor = 3140 hrs

Req1:

	Standard Quantity or Hours		Standard Price or Rate		Standard Cost
Alpha6:
Direct Material X442	6900	kilos	3.1	per kilo	21390
Direct Material Y661	4600	litres	1.3	per litre	5980
Direct Labor Sintering	920	hours	23	per hour	21160
Direct Labor Finishing	2300	hours	21.5	per hour	49450
Total					97980
Zeta7:
Direct Material X442	3500	kilos	3.1	per kilo	10850
Direct Material Y661	3500	litres	1.3	per litre	4550
Direct Labor Sintering	350	hours	23	per hour	8050
Direct Labor Finishing	840	hours	21.5	per hour	18060
Total					41510

Req2:Material Price and Quantity Variance

*MPV= Actual Qty(Standard price - Actual price)

*MQV =Standard Price(Standard quantity - Actual quantity)

Direct Material Variance for Material X442:

MPV = 10200(3.1-3.3) = 10200(-0.2)= 240(U)

MQV = 3.1(10400-10200) =3.1(200) = 620(F)

Direct Material Variance for Material Y661:

MPV = 14700(1.3-1.2) = 14700(0.1) =1470(F)

MQV= 1.3(8100-14700) = 1.3(-6600)= 8580(U)

{Note: Actual price = Total Material cost/Total Material purchased, X442 :51810/15700=3.3 ; Y661:20040/16700=1.2}

Req3: Labor rate and efficiency variance:

*LRV =Actual hours (Standard rate - Actual rate)

*LEV=Standard rate (Standard hours - Actual hours)

Direct Labor Variance for Sintering:

LRV =1450(23-24.2) =1450(-1.2)= 1740(U)

LEV = 23(1270-1450) =23(-180) =4140(F)

Direct Labor variance for Finishing:

LRV = 3020(21.5-23.5) =3020(-2)=6040(U)

LEV= 21.5(3140-3020) =21.5(120)= 2580(F)

{Note: Actual rate = Total labor cost/Total labor hours,

Sintering= 35090/1450=24.2 ; Finishing =70970/3020=23.5}