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Mickley Corporation produces two products, Alpha6s and Zeta7s, which pass through two operations, Sintering and Finishing....

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 2.5 kilos 2.5 liters 0.40 hours 0.90 hours Zeta7 4.5 kilos 4.5 liters 0.35 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 16,000 kilos $57,600 $3.40 per kilo 10,500 kilos Y661 17,000 liters $25,500 $1.60 per liter 15,000 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 $21.00 per hour in Finishing. During May, 1,400 direct labor-hours were worked in Sintering at a total labor cost of $34,300, and 3,050 direct labor-hours were worked in Finishing at a total labor cost of $70,150. Production during May was 2,600 Alpha6s and 1,000 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

Solutions

Expert Solution

Units Cost Standard Cost
Particulars Alpha 6 Zeta 7 Alpha 6 Zeta 7 Alpha 6 Zeta 7
Raw material
X442 - kgs           2.00           3.00 $       4.30 $         4.30 $       8.60 $ 12.90
Y661 - ltrs           1.50           2.50 $       1.60 $         1.60 $       2.40 $   4.00
Labour
Sintering - hrs           0.10           0.45 $    22.00 $       22.00 $       2.20 $   9.90
Finishing - hrs           0.80           0.90 $    21.00 $       21.00 $    16.80 $ 18.90
Total $    30.00 $ 45.70
Units Cost Standard Cost Actual Units Actual Cost Actual cost p.u
Particulars Alpha 6 Zeta 7 Alpha 6 Zeta 7 Alpha 6 Zeta 7
Raw material
X442 - kgs           2.00           3.00 $       4.30 $         4.30 $       8.60 $ 12.90      14,800.00 $ 66,600.00 $                  4.50
Y661 - ltrs           1.50           2.50 $       1.60 $         1.60 $       2.40 $   4.00      15,800.00 $ 23,700.00 $                  1.50
Labour
Sintering - hrs           0.10           0.45 $    22.00 $       22.00 $       2.20 $   9.90         1,220.00 $ 28,060.00 $                23.00
Finishing - hrs           0.80           0.90 $    21.00 $       21.00 $    16.80 $ 18.90         1,930.00 $ 67,390.00 $                34.92
Total $    30.00 $ 45.70

Direct Material Price Varance = (Actual Price - Standard Price) x Actual quantity purchased

Direct Material Price Variance X442= ($4.50 - $4.30) x 14,800 = $2,960 U

Direct Material Price Variance Y661= ($1.50 - $1.60) x 15,800 = $1,520 F

Direct Labour Rate Variance = (Actual Rate - Standard Rate) x Actual Labour hours

Direct Labour Rate Variance Sintering = ($23 - $22) x 1,220 = $1,220 U

Direct Labour Rate Variance Finishing = ($34.92 - $21) x 2,930 = $40,785.60 U

Direct Material Quantity Variance = (Actual Quantity Used - Standard Quantity Allowed ) x Standard Price

Direct Material Quantity Variance X442 = (9,300 - 9,400) x $4.30 = $430 F

Direct Material Quantity Variance Y661 = (13,800 - 7,450) x $1.60 = $10,160 U

Direct Material Usage Variance = (Actual Labour Used - Standard Labour Allowed ) x Standard Rate

Direct Material Quantity Variance Sintering = (1,220 - 950) x $22 = $5,940 U

Direct Material Quantity Variance Finishing = (2,930 - 3,280) x $21 = $7,350 F


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