Question

In: Accounting

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 1.5 kilos 2.5 liters 0.20 hours 0.90 hours
Zeta7 3.5 kilos 3.5 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 14,700 kilos $64,680 $4.20 per kilo 9,200 kilos
Y661 15,700 liters $23,550 $1.60 per liter 13,700 liters

The following additional information is available:

  1. The company recognizes price variances when materials are purchased.
  2. The standard labor rate is $22.00 per hour in Sintering and $20.50 per hour in Finishing.
  3. 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.
  4. Production during May was 2,200 Alpha6s and 1,700 Zeta7s.

Required:

1. Complete the standard cost card for each product, showing the standard cost of direct materials and direct labor. (Round your answers to 2 decimal places.)

2. Compute the materials price and quantity variances for each material. (Input all amounts as positive values. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e, zero variance).)

3. Compute the labor rate and efficiency variances for each operation. (Input all amounts as positive values. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e, zero variance).)

Solutions

Expert Solution

1)

Standard hours or quantity Standard Price or Rate Standard Cost
Alpha6:
Direct materials-X442 1.5 kilos $4.20 per kilo $6.3
Direct materials- Y661 2.5 liters 1.60 per liter 4.0
Direct labor- Sintering 0.20 hours 22.00 per hour 4.4
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 $14.7
Direct materials- Y661 3.5 liters 1.60 per liter 5.6
Direct labor- Sintering 0.35 hours 22.00 per hour 7.7
Direct labor- Finishing 0.80 hours 20.50 per hour 16.4
Total $44.4

2) Direct Materials Variances- Materials X442:

Actual price= $64680/14700= $4.40

Materials price variance= (Standard price-Actual price)*Actual quantity

= ($4.20-4.40)*14700= $2940 U

Standard quantity= (1.5*2200+3.5*1700)= 9250

Materials quantity variance= (Standard quantity-Actual quantity)*Standard price

= (9250-9200)*$4.20= $210 F

Direct Materials Variances- Materials Y661:

Actual price= $23550/15700= $1.50

Materials price variance= (Standard price-Actual price)*Actual quantity

= ($1.60-1.50)*15700= $1570 F

Standard quantity= (2.5*2200+3.5*1700)= 11450

Materials quantity variance= (Standard quantity-Actual quantity)*Standard price

= (11450-13700)*$1.60= $3600 U

3) Direct Labor Variances- Sintering:

Actual rate= $27840/1200= $23.2

Labor rate variance= (Standard rate-actual rate)*Actual hours

= ($22.0-23.2)*1200= $1440 U

Standard hour= (0.20*2200+0.35*1700)= 1035

Labor efficiency variance= (Standard hour-Actual hour)*Standard rate

= (1035-1200)*$22.00= $3630 U

Direct Labor Variances- Finishing:

Actual rate= $65700/2920= $22.5

Labor rate variance= (Standard rate-actual rate)*Actual hours

= ($20.50-22.50)*2920= $5840 U

Standard hour= (0.90*2200+0.80*1700)= 3340

Labor efficiency variance= (Standard hour-Actual hour)*Standard rate

= (3340-2920)*$20.50= $8610 F


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