In: Accounting
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:
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).)
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