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:

The company recognizes price variances when materials are purchased.

The standard labor rate is $21.00 per hour in Sintering and $20.00 per hour in Finishing.

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.

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).)

rev: 06_13_2016_QC_CS-53459, 06_30_2016_QC_CS-54927, 07_01_2016_QC_CS-54927

Answer 1

Prepare the standard cost card showing the standard cost of direct materials and direct labor of products A6 as shown below:

Part 1.1

To compute the standard direct material cost per unit of output A6, multiply the standard quantity of direct material with the standard cost per unit of direct material.

To compute the standard direct labor cost per unit of output A6, multiply the standard direct labor hours per unit of output with the standard cost per direct labor hour.

Step 2 of 14

Prepare the standard cost card showing the standard cost of direct materials and direct labor of products Z7 as shown below:

Part 1.2

To compute the standard direct material cost per unit of output Z7, multiply the standard quantity of direct material with the standard cost per unit of direct material.

To compute the standard direct labor cost per unit of output Z7, multiply the standard direct labor hours per unit of output with the standard cost per direct labor hour.

Step 3 of 14

2.

Compute the direct materials price variance for material X442 as shown below:

Direct material price variance: It is the difference between the actual price of raw material purchased in the production and the standard price of raw material purchased in the production.

Thus, the direct material price variance is.

Part 2.1.1

The direct material price variance is $1,450 unfavorable

To compute the direct material price variance, deduct the standard price of raw material purchased in the production from the actual price of raw material purchased in the production.

The actual cost of raw material purchased is calculated by multiplying the actual price of raw material with the actual quantity of raw material purchased for the production.

The actual price of raw material is computed by dividing the total cost of raw material purchased by the actual quantity of raw material purchased.

The standard cost of raw material to be purchased is calculated by multiplying the standard price of raw material with the actual quantity of raw material purchased for the production.

Step 4 of 14

Compute the material price variance of material Y661 as shown below:

Thus, the direct material price variance is.

Part 2.1.2

The direct material price variance is $775 favorable.

To compute the direct material price variance, deduct the standard price of raw material purchased from the actual price of raw material purchased

The actual cost of raw material used is calculated by multiplying the actual price of raw material with the actual quantity of raw material purchased in the production. The actual price of raw material is computed by dividing the total cost of raw material purchased by the actual quantity of raw material purchased.

The standard cost of raw material purchased is calculated by multiplying the standard price of raw material with the actual quantity of raw material purchased.

Step 5 of 14

Compute the standard quantity of raw material X442 required for actual production as shown below:

Thus, the standard quantity of raw material X442 required for actual output is.

Compute standard quantity of raw material X442 for actual production of A6 by multiplying with standard quantity of X442 per unit of A6 with actual output of A6 produced.

Compute standard quantity of raw material X442 for actual production of Z7 by multiplying with standard quantity of X442 per unit of Z7 with actual output of Z7 produced.

Sum up both standard quantity of raw material used for production of A6 and Z7 resulting in total standard quantity of raw material X442 for actual production.

Step 6 of 14

Compute the direct materials quantity variance for material X442 as shown below:

Direct material quantity variance: It is the difference between the standard cost of actual direct material used in the production and the standard cost of standard quantity of direct material required for actual production.

Thus, the direct material quantity variance is.

Part 2.2.1

The direct material quantity variance is $700 favorable.

To compute the direct material quantity variance, deduct standard cost of standard quantity of raw material required for actual production from the standard cost of actual raw material used in the production.

To compute the standard cost of standard quantity of raw material for actual production, multiply the standard price per unit with the standard quantity of raw material required for actual output.

To compute the standard cost of actual raw material used in the production, multiply the standard price of raw material per unit with the actual quantity of raw material used in the production.

Step 7 of 14

Compute the standard quantity of raw material Y661 required for actual production as shown below:

Thus, the standard quantity of raw material Y661 required for actual output is.

Compute standard quantity of raw material Y661 for actual production of A6 by multiplying with standard quantity of Y661 per unit of A6 with actual output of A6 produced.

Compute standard quantity of raw material Y661 for actual production of Z7 by multiplying with standard quantity of Y661 per unit of Z7 with actual output of Z7 produced.

Sum up both standard quantity of raw material used for production of A6 and Z7 resulting in total standard quantity of raw material Y661 for actual production.

Step 8 of 14

Compute the direct materials quantity variance for material Y661 as shown below:

Thus, the direct material quantity variance is.

Part 2.2.2

The direct material quantity variance is $1,400 unfavorable.

To compute the direct material quantity variance, deduct standard cost of standard quantity of raw material required for actual production from the standard cost of actual raw material used in the production.

To compute the standard cost of standard quantity of raw material for actual production, multiply the standard price per unit with the standard quantity of raw material required for actual output.

To compute the standard cost of actual raw material used in the production, multiply the standard price of raw material per unit with the actual quantity of raw material used in the production.

Step 9 of 14

3.

Compute the direct labor rate variance of S process as shown below:

Direct labor rate variance: It is the difference between the standard rate and actual rate of direct labor for actual hours.

Thus, the direct labor rate variance is.

Part 3.1.1

The direct labor rate variance is $3,240 unfavorable.

To compute the direct labor rate variance, deduct the actual direct labor cost incurred from standard cost of actual hours worked.

To compute the actual direct labor cost incurred, multiply the actual direct labor rate per hour with the actual direct labor hours worked.

To compute the standard cost of actual hours worked, multiply the standard direct labor rate per hour with the actual direct labor hours worked.

Step 10 of 14

Compute the direct labor rate variance of F process as shown below:

Thus, the direct labor rate variance is.

Part 3.1.2

The direct labor rate variance is $5,130 unfavorable.

To compute the direct labor rate variance, deduct the actual direct labor cost incurred from standard cost of actual hours worked.

To compute the actual direct labor cost incurred, multiply the actual direct labor rate per hour with the actual direct labor hours worked.

To compute the standard cost of actual hours worked, multiply the standard direct labor rate per hour with the actual direct labor hours worked.

Step 11 of 14

Compute the standard hours of S process required for actual output of A6 and Z7 as shown below:

Thus, the standard hours of S process for actual output of A6 and Z7 are.

Compute standard hours in S process for actual production of A6 by multiplying with standard hours per unit of A6 with actual output of A6 produced.

Compute standard hours in S process for actual production of Z7 by multiplying with standard hours per unit of Z7 with actual output of Z7 produced.

Sum up both standard labor hours used for production of A6 and Z7 resulting in total standard labor hours of S process required for actual production.

Step 12 of 14

Compute the direct labor efficiency variance of S process as shown below;

Direct labor efficiency variance: It is the difference between the standard cost of actual hours worked and the standard cost of standard hours required for actual production.

Thus, the direct labor efficiency variance is.

Part 3.2.1

The direct labor efficiency variance is $3,960 unfavorable.

To compute the direct labor efficiency variance, deduct the standard cost of standard hours for actual output from the standard cost for actual hours worked.

To compute the standard cost of standard hours for actual output, multiply the standard rate per hour with the standard direct labor hours for actual output.

To compute the standard cost of actual hours worked, multiply the standard rate per hour with the actual labor hours worked.

Step 13 of 14

Compute the standard hours of F process required for actual output of A6 and Z7 as shown below:

Thus, the standard hours of F process for actual output of A6 and Z7 are.

Compute standard hours in F process for actual production of A6 by multiplying with standard hours per unit of A6 with actual output of A6 produced.

Compute standard hours in F process for actual production of Z7 by multiplying with standard hours per unit of Z7 with actual output of Z7 produced.

Sum up both standard labor hours used for production of A6 and Z7 resulting in total standard labor hours of F process required for actual production.

Step 14 of 14

Compute the direct labor efficiency variance of F process as shown below;

Direct labor efficiency variance: It is the difference between the standard cost of actual hours worked and the standard cost of standard hours required for actual production.

Thus, the direct labor efficiency variance is.

Part 3.2.2

The direct labor efficiency variance is $2,880 favorable.

To compute the direct labor efficiency variance, deduct the standard cost of standard hours for actual output from the standard cost for actual hours worked.

To compute the standard cost of standard hours for actual output, multiply the standard rate per hour with the standard direct labor hours for actual output.

To compute the standard cost of actual hours worked, multiply the standard rate per hour with the actual labor hours worked.

Part 1.1

Part 1.2

Part 2.1.1

The direct material price variance is $1,450 unfavorable.

Part 2.1.2

The direct material price variance is $775 favorable.

Part 2.2.1

The direct material quantity variance is $700 favorable.

Part 2.2.2

The direct material quantity variance is $1,400 unfavorable.

Part 3.1.1

The direct labor rate variance is $3,240 unfavorable.

Part 3.1.2

The direct labor rate variance is $5,130 unfavorable.

Part 3.2.1

The direct labor efficiency variance is $3,960 unfavorable.

Part 3.2.2

The direct labor efficiency variance is $2,880 favorable.