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	1.2 kilos	2.0 liters		0.40 hours	0.80 hours
Zeta7	3.0 kilos	4.0 liters		0.10 hours	0.60 hours

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

Material	Purchases		Purchase Cost	Standard Price		Used in Production
X442	14,500	kilos	$60,900	$4.00	per kilo	9,000	kilos
Y661	15,500	liters	$27,900	$1.90	per liter	13,500	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 $19.50 per hour in Finishing.

3. During May, 1,250 direct labor-hours were worked in Sintering at a total labor cost of $28,750, and 2,900 direct labor-hours were worked in Finishing at a total labor cost of $62,350.

4. Production during May was 2,000 Alpha6s and 2,250 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

Solution:

1)

Alpha
	SQ/Sh	SP/SR	Standard cost per unit
DM X442	1.2	4	$4.8
DM Y661	2.0	1.90	$3.8
DL Sintering	0.40	21	$8.4
DL Finishing	0.8	19.50	$15.6
Total			$32.6
Zeta
DM X442	3	4	$12
DM Y661	4	1.90	$7.6
DL Sintering	0.10	21	$2.1
DL Finishing	0.60	19.50	$11.7
Total			$33.4

2)

	Material X442	Material Y661
Standard quantity allowed (2,000*1.2+2,250*3)	$9,150	$9,150
Actual qty purchased	14,500	15,500
Actual qty used	9,000	13,500
Std price	4	1.90
Actual price	4.2 (60,900/14,500)	1.8 (27,900/15,500)

	Material X442	Material Y661
Material price variance =Actual aty purchased*(Std price - Actual price)	$150 unfavorable [14,500(4-4.2)]	$1,550 favorable[15,500(1.90-1.8)]
Material qty variance =Std price(Std qty - Actual qty)	$600 favorable [4*(9,150-9,000)]	$8,265 Unfavorable [1.90(9,150 -13,500)]

3)

	Sintering	Finishing
Std labour hours	$1,025 (2,000*0.4+2,250*0.10)	2,950 (2,000*0.8+2,250*.60)
Std rate	21	19.50
Actual labour hours	1,250	2,900
Actual rate	23 (28,750/1,250)	21.5 (62,350/2,900)

	Sintering	Finishing
Labour rate variance= Actual hours (Std rate-Actual rate)	$2,500 unfavorable[1,250(21-23)]	$5,800 unfavorable[2,900(19.50-21.5)]
Labouor efficiency variance= Std rate(Std hours-Actual ho.urs)	$4,725 unfavorable [21(1,025 -1,250)]	$975 favorable [19.50(2,950-2,900)]

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