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	2.5 kilos	2.5 liters		0.40 hours	1.20 hours
Zeta7	4.5 kilos	5.5 liters		0.40 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	15,400 kilos	$46,200	$2.80	per kilo	9,900	kilos
Y661	16,400 liters	$27,880	$1.80	per liter	14,400	liters

The following additional information is available:

1. The company recognizes price variances when materials are purchased.
2. The standard labor rate is $21.00 per hour in Sintering and $20.00 per hour in Finishing.
3. During May, 1,350 direct labor-hours were worked in Sintering at a total labor cost of $33,210, and 2,990 direct labor-hours were worked in Finishing at a total labor cost of $65,780.
4. Production during May was 2,000 Alpha6s and 1,200 Zeta7s.

Requied:

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).

Answer 1

1.

	Standard Quantity or hours		Standard Price or Rate		Standard Cost
Alpha 6
Direct Material - X442	2.50	kilos	$             2.80	per kilo	$             7.00
Direct Material - Y661	2.50	liters	$             1.80	per liter	$             4.50
Direct Labor - Sintering	0.40	hours	$           21.00	per hour	$             8.40
Direct Labor - Finishing	1.20	hours	$           20.00	per hour	$           24.00
Total					$           43.90
Zeta 7
Direct Material - X442	4.50	kilos	$             2.80	per kilo	$           12.60
Direct Material - Y661	5.50	liters	$             1.80	per liter	$             9.90
Direct Labor - Sintering	0.40	hours	$           21.00	per hour	$             8.40
Direct Labor - Finishing	0.80	hours	$           20.00	per hour	$           16.00
Total					$           46.90

2. Material Price Variance = Actual Material Cost - Actual Quantity purchased x Standard Price
X442 = $46200 - 15400 x 2.80 = $3080 (U)
Y661 = $27880 - 16400 x 1.80 = $1640 (F)

Material Quantity Variance = (Actual quantity used - Standard quantity) x Standard Price
X442 = (9900-10400) x 2.80 = $1400 (F)
Standard Quantity = 2000 x 2.5 + 1200 x 4.5 = 10400

Y661 = (14400-11600) x 1.80 = $5040 (U)
Standard Quantity = 2000 x 2.5 + 1200 x 5.5 = 11600

3. Direct labor rate variance = Actual labor cost - Actual hours x standard rate
Sintering = $33210 - 1350 x 21 = $4860 (U)
Finishing = $65780 - 2990 x 20 = $5980 (U)

Direct Labor efficiency variance = (Actual hours - Standard hours) x Standard rate
Sintering = (1350-1280) x 21 = $1470 (U)
Standard hours = 2000 x 0.4 + 1200 x 0.4 = 1280

Finishing = (2990 - 3360) x 20 = $7400 (F)
Standard hours = 2000 x 1.2 + 1200 x 0.8 = 3360