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	1.5 liters		0.10 hours	0.80 hours
Zeta7	3.0 kilos	2.5 liters		0.45 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	14,800	kilos	$66,600	$4.30	per kilo	9,300	kilos
Y661	15,800	liters	$23,700	$1.60	per liter	13,800	liters

The following additional information is available:

1. The company recognizes price variances when materials are purchased.

2. The standard labor rate is $22.00 per hour in Sintering and $21.00 per hour in Finishing.

3. During May, 1,220 direct labor-hours were worked in Sintering at a total labor cost of $28,060, and 2,930 direct labor-hours were worked in Finishing at a total labor cost of $67,390.

4. Production during May was 2,300 Alpha6s and 1,600 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:

	Standard Quantity or Hours		Standard Price or Rate		Standard Cost
Alpha6:
Direct materials-X442	2.00	kilos	4.30	per kilo	8.60
Direct materials-Y661	1.50	liters	1.60	per liter	2.40
Direct labor-Sintering	0.10	hours	22.00	per hour	2.20
Direct labor-Finishing	0.80	hours	21.00	per hour	16.80
Total					30.00
Zeta7:
Direct materials-X442	3.00	kilos	4.30	per kilo	12.90
Direct materials-Y661	2.50	liters	1.60	per liter	4.00
Direct labor-Sintering	0.45	hours	22.00	per hour	9.90
Direct labor-Finishing	0.90	hours	21.00	per hour	18.90
Total					45.70

Solution 2:

Direct Materials Variances
Direct Materials Variances-Material X442:
Materials price variance	$2,960	U
Materials quantity variance	$430	F
Direct Materials Variances-Material Y661:
Materials price variance	$1,580	F
Materials quantity variance	$10,160	U

Working:

Material X442: Price Variance
Actual Cost (Purchased)				Standard cost for actual quantity
AQ	*	AP		AQ	*	SP
14800	*	$4.50		14800	*	$4.30
	$66,600				$63,640
			$2,960	U
Material X442: Quantity Variance
Standard cost for actual quantity (Used)				Standard Cost
AQ	*	SP		SQ	*	SP
9300	*	$4.30		9400	*	$4.30
	$39,990				$40,420
			$430	F

Material Y661: Price Variance
Actual Cost (Purchased)				Standard cost for actual quantity
AQ	*	AP		AQ	*	SP
15800	*	$1.50		15800	*	$1.60
	$23,700				$25,280
			$1,580	F
Material Y661: Quantity Variance
Standard cost for actual quantity (Used)				Standard Cost
AQ	*	SP		SQ	*	SP
13800	*	$1.60		7450	*	$1.60
	$22,080				$11,920
			$10,160	U

Solution 3:

Direct Labor Variances
Direct Labor Variances-Sintering:
Labor rate variance	$1,220	U
Labor efficiency variance	$5,940	U
Direct Labor Variances-Finishing:
Labor rate variance	$5,860	U
Labor efficiency variance	$7,350	F

Working:

Sintering: Direct Labor Variances
Actual Cost				Standard cost for actual quantity				Standard Cost
AH	*	AR		AH	*	SR		SH	*	SR
1220	*	$23.00		1220	*	$22.00		950	*	$22.00
	$28,060				$26,840				$20,900
			$1,220	U			$5,940	U
Finishing: Direct Labor Variances
Actual Cost				Standard cost for actual quantity				Standard Cost
AH	*	AR		AH	*	SR		SH	*	SR
2930	*	$23.00		2930	*	$21.00		3280	*	$21.00
	$67,390				$61,530				$68,880
			$5,860	U			$7,350	F