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	3.0 kilos	3.0 liters		0.30 hours	1.10 hours
Zeta7	5.0 kilos	5.0 liters		0.40 hours	1.20 hours

Information relating to materials purchased and materials used in production during May follows:

Material	Purchases		Purchase Cost	Standard Price		Used in Production
X442	15,300	kilos	$44,370	$2.70	per kilo	9,800	kilos
Y661	16,300	liters	$26,080	$1.70	per liter	14,300	liters

The following additional information is available:

The company recognizes price variances when materials are purchased.

The standard labor rate is $23.00 per hour in Sintering and $21.50 per hour in Finishing.

During May, 1,320 direct labor-hours were worked in Sintering at a total labor cost of $32,340, and 2,980 direct labor-hours were worked in Finishing at a total labor cost of $70,030.

Production during May was 1,900 Alpha6s and 900 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

Alpha8		Std qty or hrs	Std Price or rate	Std cost
Direct Materials	X442	3	2.7	8.1
Direct Materials	Y661	3	1.7	5.1
Direct Materials	Sintering	0.3	23	6.9
Direct Materials	Finishing	1.1	21.5	23.65
Total Cost				43.75
Zeta9		Std qty or hrs	Std Price or rate	Std cost
Direct Materials	X442	5	2.7	13.5
Direct Materials	Y661	5	1.7	8.5
Direct Materials	Sintering	0.4	23	9.2
Direct Materials	Finishing	1.2	21.5	25.8
Total Cost				57
Materials Price Variance		(Actual Unit cost - Standard Unit cost)*Actual Qty purchased
X442		44370/15300	2.9
		(2.9-2.7)*15300	3060	U
Y661		26080/16300	1.6
		(1.6-1.7)*16300	-1630	F
Material Qty Variance		(Actual Qty- Std Qty)*Std Rate
X442		(9800-10200)*2.7	-1080	F
Material Required for Alpha6s		1900*3	5700
Material Required for Zeta9		900*5	4500
			10200
Y661		(14300-10200)*1.7	6970	U
Material Required for Alpha6s		1900*3	5700
Material Required for Zeta9		900*5	4500
			10200
Labor Rate Variance		(Actual labor cost - Standard labor cost)*Actual Labor hours
Sintering	32340/1320	24.5
		(24.50-23)*1320
		1980	U
Finishing	70030/2980	23.5
		(23.50-21.50)*2980
		5960	U
Labor Efficiency Variance		(Actual Hrs- Std Hrs)*Std Rate
Sintering
Labor Hrs Required for Alpha6s		(1900*0.30)	570
Labor Hrs Required for Zeta9		(900*0.40)	360
			930
		(1320-930)*23	8970	U
Finishing
Labor Hrs Required for Alpha6s		(1900*1.10)	2090
Labor Hrs Required for Zeta9		(900*1.20)	1080
			3170
		(2980-3170)*21.50	-4085	F