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 Finishing 0.90 hours Sintering Y661 1.5 liters Product X442 2.0 kilos Alpha6 0.30 hours 4.0 kilos 3.0 liters Zeta7 0.40 hours 1.00 hours Information relating to materials purchased and materials used in production during May follows: Used in Production Purchase Standard Material Price $3.90 per kilo $1.80 per 1iter Purchases Cost 14,400 kilos 15,400 liters 8,900 kilos 13,400 liters X442 Y661 $59,040 $26,180 The following additional information is available: a. The company recognizes price variances when materials are purchased b. The standard labor rate is $20.00 per hour in Sintering and $19.00 per hour in Finishing. c. During May, 1,200 direct labor-hours were worked in Sintering at a total labor cost of $27,480, and 2,890 direct labor-hours were worked in Finishing at a total labor cost of $60,690. d. Production during May was 1,900 Alpha6s and 1,300 Zeta7s.

Answer 1

	Standard Quantity or hours		Standard Price or Rate		Standard Cost
Alpha 6
Direct Material - X442	2.00	kilos	$        3.90	per kilo	$      7.80
Direct Material - Y661	1.50	liters	$        1.80	per liter	$      2.70
Direct Labor - Sintering	0.30	hours	$      20.00	per hour	$      6.00
Direct Labor - Finishing	0.90	hours	$      19.00	per hour	$   17.10
Total					$   33.60
Zeta 7
Direct Material - X442	4.00	kilos	$        3.90	per kilo	$   15.60
Direct Material - Y661	3.00	liters	$        1.80	per liter	$      5.40
Direct Labor - Sintering	0.40	hours	$      20.00	per hour	$      8.00
Direct Labor - Finishing	1.00	hours	$      19.00	per hour	$   19.00
Total					$   48.00

Product X442
Direct Material price Variance = (Actual Price - Standard Price) x Actual Quantity Purchased
= ($4.10 - $3.90) x 14400 = $2880 (U)
Actual Price = $59040/14400

Direct Material Quantity Variance = (Actual Quantity - Standard Quantity) x Standard Price
= (8900 - 9000) x $3.90 = $390 (F)
Standard Quantity = 1900 x 2 + 1300 x 4 = 9000

Product Y661
Direct Material price Variance = (Actual Price - Standard Price) x Actual Quantity Purchased
= ($1.70 - $1.80) x 15400 = $1540 (F)
Actual price = $26180/15400 = $1.70

Direct Material Quantity Variance = (Actual Quantity - Standard Quantity) x Standard Price
= (13400 - 6750) x $1.80 = $11970 (U)
Standard Quantity = 1900 x 1.50 + 1300 x 3 = 6750

Direct Labor Variances - Sintering
Labor rate Variance = (Actual Rate - Standard Rate) x Actual hours
= ($22.90 - $20) x 1200 = $3480 (U)
Actual Rate = $27480/1200 = $22.90

Labor Efficiency Variance = (Actual hours - Standard hours) x Standard Rate
= (1200 - 1090) x $20 = $2200 (U)
Standard hours = 1900 x 0.30 + 1300 x 0.40 = 1090

Direct Labor Variances - Finishing
Labor rate Variance = (Actual Rate - Standard Rate) x Actual hours
= ($21 - $19) x 2890 = $5780 (U)
Actual Rate = $60690/2890 = $21

Labor Efficiency Variance = (Actual hours - Standard hours) x Standard Rate
= (2890 - 3010) x $19 = $2280 (F)
Standard hours = 1900 x 0.90 + 1300 x 1 = 3010