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 2.0 kilos 1.5 liters 0.10 hours 1.00 hours Zeta7 3.0 kilos 4.5 liters 0.30 hours 0.80 hours Information relating to materials purchased and materials used in production during May follows: Material Purchases Purchase Cost Standard Price Used in Production X442 14,200 kilos $55,380 $3.70 per kilo 8,700 kilos Y661 15,200 liters $22,800 $1.60 per liter 13,200 liters The following additional information is available: The company recognizes price variances when materials are purchased. The standard labor rate is $22.00 per hour in Sintering and $18.10 per hour in Finishing. During May, 1,200 direct labor-hours were worked in Sintering at a total labor cost of $27,240, and 2,870 direct labor-hours were worked in Finishing at a total labor cost of $60,270. Production during May was 1,700 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

Paart-1
	Standard	Standard	Standard
Quantity or Hours	Price or Rate	Cost
Alpha6:
Direct materials-X442	2	kilos	3.7		per kilo	7.4
Direct materials-Y661	1.5	litres	1.6		per litre	2.4
Direct labor-Sintering	0.1	hours	22		per hour	2.2
Direct labor-Finishing	1	hours	18.1		per hour	18.1
tal						30.1
Zeta7:
Direct materials-X442	3	kilos	3.7		per kilo	11.1
Direct materials-Y661	4.5	litres	1.6		per litre	7.2
Direct labor-Sintering	0.3	hours	22		per hour	6.6
Direct labor-Finishing	0.8	hours	18.1		per hour	14.48
tal						39.38

Part-2
2. Material price variance = [SP-AP] x AQ purchased
Material X442 = [$3.70 - $3.90] x 14200 = $2840 U
Material Y661 = [$1.60 - $1.50] x 15200 = $1520 F
Material quantity variance = [SQ-AQ used] x SP
Material X442 = [{(2 x 1700) + (3 x 1800)} - 8700] x $3.70 = $370 F
Material Y661 = [{(1.5x 1700) + (4.5 x 1800)} - 13200] x $1.60 = $4080 U
* X442 Actual Price per Kilos = 55380/14200=$3.90
**Y661, Actual Price Per Litre = 22800/15200=$1.50/ Litre
Direct material variance - Material X442
Material price variance	2840UF
Material quantity variance	370F
Direct material variance - Material Y661
Material price variance	1520F
Material quantity variance	4080U
Part-3
3. Direct labor rate variance = [SR-AR] x AH worked
Sintering = [22- 22.70] x 1200 = $840 U
Finishing = [18.10 - 21] x 2870 = $7462 U
*Actual Rate/ Hour for Sintering :- $27240/1200=$22.70
**Actual Rate/ Hour for Finishing :- $60270/2870=$21
Direct labor efficiency variance = [SH-AH] x SR
Sintering = [{(0.10 x 1700) + (0.30 x 1800)} - 1200] x $22 = $10780 U
Finishing = [{(1.0 x 1700) + (0.8 x 1800)} - 2870] x $18.10 = $4887 F
Direct labor variances - Sintering:
Labor rate variance	840U
Labor efficiency variance	10780U
Direct labor variances - Finishing:
Labor rate variance	7462U
Labor efficiency variance	4887F