Mickley Corporation produces two products, Alpha6s and Zeta7s, which pass throug

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 1.8 kilos 2.0 liters 0.20 hours 0.80 hours

Zeta7 3.0 kilos 4.5 liters 0.35 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 14,500 kilos $52,200 $3.50 per kilo 8,500 kilos

Y661 15,500 liters $20,925 $1.40 per liter 13,000 liters

The following additional information is available:

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

b. The standard labor rate is $19.80 per hour in Sintering and $19.20 per hour in Finishing.

c. During May, 1,200 direct labor-hours were worked in Sintering at a total labor cost of $27,000, and 2,850 direct labor-hours were worked in Finishing at a total labor cost of $59,850.

d. Production during May was 1,500 Alpha6s and 2,000 Zeta7s.

Required:

2. Compute the materials price and quantity variances for each material. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Round your answers to 2 decimal places)

3. Compute the labor rate and efficiency variances for each operation

2. Compute the materials price and quantity variances for each material. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Round your answers to 2 decimal places)

3. Compute the labor rate and efficiency variances for each operation

Explanation / Answer

X442 Y661 SQ per Unit SQ SR SQ per Unit SQ SR Alpha6                    1.80              2,700                3.50               2.00            3,000           1.40 Zeta7                    3.00              6,000                3.50               4.50            9,000           1.40 Total              8,700          12,000 AQ AR AQ AR Total              8,500                3.60          13,000           1.35 Material Price Variance = (SR - AR) X AQ X442 ($3.50 $3.60) X 14500 Kg $1,450 (U) Y661 ($1.40 - $1.35) X 15500 Kg $775 (F) Total Material Price Variance $675 (U) Material quantity Variance = (SQ - AQ) X SR X442 (8700 - 8500) X $3.5 $700 (F) Y661 (12000 - 13000) X $1.4 $1,400 (U) Total Material Quantity Variance $700 (U) Answer 2. Sintering Finishing SH per Unit SH SR SH per Unit SH SR Alpha6                    0.20                 300              19.80               0.80            1,200         19.20 Zeta7                    0.35                 700              19.80               0.90            1,800         19.20 Total              1,000            3,000 AH AR AH AR Total              1,200              22.50            2,850         21.00 Labour Rate Variance = (SR - AR) X AH Sintering ($19.80 - $22.50) X 1200 Hr $3,240 (U) Finishing ($19.20 - $21) X 2850 Hr $5,130 (U) Total Labor rate Variance $8,370 (U) Labour Efficiency Variance = (SH - AH) X SR Sintering (1000 - 1200) X $19.80 $3,960 (U) Finishing (3000 - 2850) X $19.20 $2,880 (F) Total Labor efficiency Variance $1,080 (U)

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