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	1.5 kilos	2.0 liters		0.20 hours	0.80 hours
Zeta7	3.5 kilos	4.0 liters		0.40 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	14,300	kilos	$57,200	$3.80	per kilo	8,800	kilos
Y661	15,300	liters	$24,480	$1.70	per liter	13,300	liters

The following additional information is available:

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

2. The standard labor rate is $20.00 per hour in Sintering and $18.50 per hour in Finishing.

3. During May, 1,300 direct labor-hours were worked in Sintering at a total labor cost of $29,640, and 2,880 direct labor-hours were worked in Finishing at a total labor cost of $59,040.

4. Production during May was 1,800 Alpha6s and 1,800 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

			SQ/SH	SP/SR	Std cost
Alpha-6
Direct material -X442			1.5	3.8	5.7
Direct material-Y661			2	1.7	3.4
Direct Labour-Sintering			0.2	20	4
Direct labour-inishing			0.8	18.5	14.8
Total					27.9
Zeta -7
Direct material -X442			3.5	3.8	13.3
Direct material-Y661			4	1.7	6.8
Direct Labour-Sintering			0.4	20	8
Direct labour-inishing			0.9	18.5	16.65
Total					44.75
Material-X442
Std qty allowed:		(1800*1.5+1800*3.50)			9000
Std price per unit					3.8
Actual qty purchased					14300
Actual qty used					8800
Actual price		(57200/14300)			4
Material price variance: Actual Qty purchased (Std price-Actual price)
		14300 (3.80-4.00) = 2860 unfav
Material Qty variance: Std price(Std qty-Actual Qty)
		3.80 (9000-8800) = 760 Fav
Material Y-661
Std qty allowed:		(1800*2+1800*4)			10800
Std price per unit					1.7
Actual qty purchased					15300
Actual qty used					13300
Actual price		(24480/15300)			1.6
Material price variance: Actual Qty purchased (Std price-Actual price)
		15300 (1.70-1.60) = 1530 fav
Material Qty variance: Std price(Std qty-Actual Qty)
		1.70 (10800-13300) = 4250 unfav
Sintering labour
Std labour hours allowed			(1800*0.20+1800*0.40)		1080
Std rate per hour					20
Actul hours					1300
Actual price			(29640/1300)		22.8
Labour rate variance= Actual hours (Sstd rate-Actual rate)
		1300 (20-22.80)= 3640 Unfav
Labour efficiency variannce= Std rate (Std hours-Actual hours)
		20 (1080-1300) = 4400 Unfav
Finishing labour
Std labour hours allowed			(1800*0.8+1800*0.90)		3060
Std rate per hour					18.5
Actul hours					2880
Actual price			(59040/2880)		20.5
Labour rate variance= Actual hours (Sstd rate-Actual rate)
		2880 (18.50-20.50) = 5760 unfav
Labour efficiency variannce= Std rate (Std hours-Actual hours)
		18.50 (3060-2880) = 3330 fav