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

2.0 kilos

3.4 liters

0.20 hours

0.80 hours

Zeta7

4.0 kilos

5.0 liters

0.25 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

15,900 kilos

$55,650

$3.30

per kilo

10,400

kilos

Y661

16,900 liters

$23,660

$1.50

per liter

15,800

liters

The following additional information is available:

The company recognizes price variances when materials are purchased.

The standard labor rate is $22.00 per hour in Sintering and $20.50 per hour in Finishing.

During May, 1,300 direct labor-hours were worked in Sintering at a total labor cost of $31,720, and 3,040 direct labor-hours were worked in Finishing at a total labor cost of $68,400.

Production during May was 2,500 Alpha6s and 1,400 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.)

Standard Quantity or Hours

Standard Price or Rate

Standard Cost

Alpha6:

Direct materials-X442

2.00

kilos

$3.30

per kilo

$6.60

Direct materials-Y661

3.40

liters

$1.50

per liter

5.10

Direct labor-Sintering

0.20

hours

$22.00

per hour

4.40

Direct labor-Finishing

0.80

hours

$20.50

per hour

16.40

Total

$32.50

Zeta7:

Direct materials-X442

4.00

kilos

$3.30

per kilo

$13.20

Direct materials-Y661

5.00

liters

$1.50

per liter

7.50

Direct labor-Sintering

0.25

hours

$22.00

per hour

5.50

Direct labor-Finishing

0.90

hours

$20.50

per hour

18.45

Total

$44.65

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).)

Direct Materials Variances—Material X442:

Materials price variance

$3,180

U

Materials quantity variance

Direct Materials Variances—Material Y661:

Materials price variance

Materials quantity 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).)

Direct Labor Variances—Sintering:

Labor rate variance

Labor efficiency variance

Direct Labor Variances—Finishing:

Labor rate variance

Labor efficiency variance

Solutions

Expert Solution

Dear Friend,

In order to Calculate Material Variances and Labour Variances,

We need to Find the Various Elements related to it. Such as we need to Calculate

SQ = Standard Quantity Per Unit

AQ = Actual Quantity Per Unit

SP = Standard Price Per Unit

AP = Actual Price Per Unit

SH = Standard Hours Per Unit

SR = Standard Rate Per Hour

AH = Actual Hours Per Unit

AR = Actual Rate Per Hour.

1 . Calculation of Material Variances:

a. Material X442:

Given,

Standard Price per Unit of X442 = $ 3.30

Standard Quantity per Unit of X442 = (2500*2) + (1400*4) = 5000 + 5600 = 10,600 Kilos

Actual Price per Unit of X442 = $ 55,650 / 15,900 Kilos = $ 3.5

Actual Quantity per Unit of X442 for Price Variance = 15,900 Kilos

Actual Quantity per Unit of X442 for Usage Variance = 10,400 Kilos

Now, Calculation of Material Price Variance and Material Usage Variance:

Material Price Variance = (AQ*SP) - (AQ*AP)

=(15,900*3.30) - (15900*3.50)

=$ 52,470 - $ 55,650

= $ 3,180 (U)

Material Usage Variance = (SQ*SP) - (AQ*SP)

= (10,600*3.30) - (10,400*3.30)

= $ 34,980 - $ 34,320

=$ 660 (F)

b. Material Y661:

Given,

Standard Price per Unit of Y661 = $ 1.50

Standard Quantity per Unit of Y661 = (2500*3.4) + (1400*5) = 8500 + 7000 = 15,500 Liters

Actual Price per Unit of Y661 = $ 23,660 / 16,900 Kilos = $ 1.4

Actual Quantity per Unit of Y661 for Price Variance = 16,900 Kilos

Actual Quantity per Unit of X442 for Usage Variance = 15,800 Kilos

Now, Calculation of Material Price Variance and Material Usage Variance:

Material Price Variance = (AQ*SP) - (AQ*AP)

=(16,900*1.50) - (16900*1.40)

=$ 25,350 - $ 23,660

= $ 1,690 (F)

Material Usage Variance = (SQ*SP) - (AQ*SP)

= (15,500*1.50) - (15,800*1.50)

= $ 23,250 - $ 23,700

=$ 450 (A)

2 . Calculation of Labour Variances:

a. Sintering:

Given,

Standard Rate per Hour = $ 22.00

Standard Hours = (2500*0.2) + (1400*0.25) = 500 + 350 = 850 Hours

Actual Rate per Hour = $ 31,720 / 1,300 Hours = $ 24.4

Actual Hours = 1,300 Hours

Now, Calculation of Labour Rate Variance and Efficiency Variance:

Labour Rate Variance = (AH*SR) - (AH*AR)

= (1300*22.00) - (1300*24.4)

= $ 28,600 - $ 31,720

= $ 3,120 (U)

Labour Efficiency Variance = (SH*SR) - (AH*SR)

=(850*22.00) - (1300*22.00)

= $ 18,700 - $ 28,600

= $ 9,900 (U)

b. Finishing:

Given,

Standard Rate per Hour = $ 20.50

Standard Hours = (2500*0.8) + (1400*0.9) = 2000 + 1260 = 3260 Hours

Actual Rate per Hour = $ 68,400 / 3,040 Hours = $ 22.5

Actual Hours = 3,040 Hours

Now, Calculation of Labour Rate Variance and Efficiency Variance:

Labour Rate Variance = (AH*SR) - (AH*AR)

= (3040*20.50) - (3040*22.5)

= $ 62,320 - $ 68,400

= $ 6,080 (U)

Labour Efficiency Variance = (SH*SR) - (AH*SR)

=(3260*20.50) - (3040*20.50)

= $ 66,830 - $ 62,320

= $ 4,510 (F)


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