Question

Mickley Corporation produces two products, Alpha6s and Zeta7s, which pass through two operations, Sintering and Finishing. Each of the products uses two raw materlals-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 Finishing e.9 hours e.80 hours Product X442 Y661 2.5 liters 3.5 liters Alpha6 Zeta7 1.5 kilos e.20 hours 3.5 kilos e.35 hours Information relating to materials purchased and materlals used in production during May follows: Standard Price $4.20 per kilo $1.60 per 1iter Purchase Used in Material Purchases Cost Production 14,70e kilos 15,70e liters $64,680 $23,55e X442 9,200 kilos Y661 13,7ee liters The following additional Information Is availlable: a. The company recognizes price variances when materlals are purchased. b. The standard labor rate is $22.00 per hour in Sintering and $20.50 per hour in Finishing c. During May, 1,200 direct labor-hours were worked In Sintering at a total labor cost of $27,840, and 2,920 direct labor-hours were worked In Finishing at a total labor cost of $65,700. d. Production during May was 2.200 Alpha6s and 1,700 Zeta7s. Required: 1. Complete the standard cost card for each product, showling the standard cost of direct materlals and direct labor 2. Compute the materlals price and quantity varlances for each materlal. 3. Compute the labor rate and efficlency varlances for each operation.

Answer 1

1.

	Standard Quantity or Hours		Standard Price or Rate		Standard Cost
Alpha6:
Direct materials-X442	1.5	kilos	4.20	per kilo	6.30
Direct materials-Y661	2.5	liters	1.60	per liter	4.00
Direct labor-Sintering	0.20	hours	22.00	per hour	4.40
Direct labor-Finishing	0.90	hours	20.50	per hour	18.45
Total $					33.15
Zeta7:
Direct materials-X442	3.5	kilos	4.20	per kilo	14.70
Direct materials-Y661	3.5	liters	1.60	per liter	5.60
Direct labor-Sintering	0.35	hours	22.00	per hour	7.70
Direct labor-Finishing	0.80	hours	20.50	per hour	16.40
Total $					44.40

2.

Direct Materials Variances-Material X442:
Materials price variance	$       2,940	U
Materials quantity variance	$           210	F
Direct Materials Variances-Material Y661:
Materials price variance	$       1,570	F
Materials quantity variance	$       3,600	U

Working:

X442: Price variance										X442: Quantity variance
Actual Cost														Standard Cost
AQP	x	AP		AQP	x	SP				AQ	x	SP		SQ	x	SP
14700	x	4.40		14700	x	4.20				9200	x	4.20		9250	x	4.20
			64680				61740						38640				38850
							2940										-210
										SQ = (2200 x 1.5) + (1700 x 3.5) = 3300 + 5950 = 9250
Y661: Price variance										Y661: Quantity variance
Actual Cost														Standard Cost
AQP	x	AP		AQP	x	SP				AQ	x	SP		SQ	x	SP
15700	x	1.50		15700	x	1.60				13700	x	1.60		11450	x	1.60
			23550				25120						21920				18320
							-1570										3600
										SQ = (2200 x 2.5) + (1700 x 3.5) = 5500 + 5950 = 11450

3.

Direct Labor Variances-Sintering:
Labor rate variance	$       1,440	U
Labor efficiency variance	$       3,630	U
Direct Labor Variances-Finishing:
Labor rate variance	$       5,840	U
Labor efficiency variance	$       8,610	F

Working:

Sintering:
Actual Cost								Standard Cost
AH	x	AR		AH	x	SR		SH	x	SR
1200	x	23.20		1200	x	22.00		1035	x	22.00
			27840				26400				22770
							1440				3630
SH = (2200 x 0.20) + (1700 x 0.35) = 440 + 595 = 1035
Finishing:
Actual Cost								Standard Cost
AH	x	AR		AH	x	SR		SH	x	SR
2920	x	22.50		2920	x	20.50		3340	x	20.50
			65700				59860				68470
							5840				-8610
SH = (2200 x 0.90) + (1700 x 0.80) = 1980 + 1360 = 3340