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	2.0 kilos	1.4 liters		0.50 hours	0.90 hours
Zeta7	4.0 kilos	3.4 liters		0.10 hours	0.90 hours

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

Material	Purchases		Purchase Cost	Standard Price		Used in Production
X442	14,600	kilos	$62,780	$4.10	per kilo	9,100	kilos
Y661	15,600	liters	$21,840	$1.50	per liter	13,600	liters

The following additional information is available:

The company recognizes price variances when materials are purchased.

The standard labor rate is $15.00 per hour in Sintering and $20.00 per hour in Finishing.

During May, 1,300 direct labor-hours were worked in Sintering at a total labor cost of $30,030, and 2,910 direct labor-hours were worked in Finishing at a total labor cost of $64,020.

Production during May was 2,100 Alpha6s and 1,300 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

Statement Showing Standard Cost of Each product
	Standard		Standard		Standard
	Quantity or Hours		Price or Rate		Cost
Alpha6:
Direct materials-X442	2	kilos	$4.10	per kilo	$8.20
Direct materials-Y661	1.4	litres	$1.50	per litre	$2.10
Direct labor-Sintering	0.5	hours	$15.00	per hour	$7.50
Direct labor-Finishing	0.9	hours	$20.00	per hour	$18.00
Total					$35.80
Zeta7:
Direct materials-X442	4	kilos	$4.10	per kilo	$16.40
Direct materials-Y661	3.4	litres	$1.50	per litre	$5.10
Direct labor-Sintering	0.1	hours	$15.00	per hour	$1.50
Direct labor-Finishing	0.9	hours	$20.00	per hour	$18.00
Total					$41.00

Direct Material variance :

A. X442

1. Material Price variance = AQ(SP-AP)

=14600*$4.10-$62780 =$ 2920 (U)

2. Material Quantity Variance= SP(SQ-AQ)

=$4.10(9400*-9100)= $1230 (F)

*2100X2+1300X4=9400 Kg

B. Y661 :

1. Material Price variance = AQ(SP-AP)

=15600*1.50-21840 = 1560 (F)

2. Material Quantity Variance= SP(SQ-AQ)

=$1.50(7360-13600)= 9360(U)

*2100X1.4+1300X3.4=7360 Lit

Ans 3 : Labour Variance

A. Sinthering

1. labour rate variance : AH(SR-AR)

=1300*$15-$30030= $10530(U)

2.labour efficiency variance : SR(SH-AH)

:$15*(1180--1300)=$1800 (U)

*2100X0.50+1300X0.10=1180 hour

B. Finishing :

1. labour rate variance : AH(SR-AR)

=2910*20-$64020= $5820(U)

2.labour efficiency variance : SR(SH-AH)

:$20*(3060- 2910)=$3000(F)

*2100X0.90+1300X0.90=3060 Hour