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 Alpha6 Zeta7 X442 2.0 kilos 4.0 kilos Y661 1.5 litersS 3.0 liters Sintering 0.30 hours 0.40 hours Finishing 0.90 hours 1.00 hours Information relating to materials purchased and materials used in production during May follows Material X442 Y661 Purchases 14,400 kilos 15,400 liters Purchase Cost $59,040 $26,180 Standard Price $3.90 per kilo $1.80 per liter Used in Production 8,900 kilos 13,400 liters The following additional information is available a. The company recognizes price variances when materials are purchased b. The standard labor rate is $20.00 per hour in Sintering and $19.00 per hour in Finishing c. During May, 1,200 direct labor-hours were worked in Sintering at a total labor cost of $27,480, and 2,890 direct labor-hours were worked in Finishing at a total labor cost of $60,690. d. Production during May was 1,900 Alpha6s and 1,300 Zeta7s

Explanation / Answer

Answer No. 1:-

Standard Quantity or Hours

Standard Price or Rate

Standard Cost

Alpha6:

Direct Material – X442

3800 (WN1)

Kilos

3.9

Per kilo

14820

Direct Material – Y661

2850 (WN2)

Litres

1.8

Per litre

5130

Direct Labor – Sintering

570 (WN3)

Hours

20

Per hour

11400

Direct Labour - Finishing

1710 (WN4)

Hours

19

Per hour

32490

Total

63300

Zeta7:

Direct Material – X442

5200 (WN1)

Kilos

3.9

Per kilo

20280

Direct Material – Y661

3900 (WN2)

Litres

1.8

Per litre

7020

Direct Labor – Sintering

520 (WN3)

Hours

20

Per hour

10400

Direct Labour - Finishing

1300 (WN4)

Hours

19

Per hour

24700

Total

62400

Working Notes:-

1. Direct Material – X442:

Alpha6:

Standard quantity of X442 in Alpha6 = 2 kilos

Quantity of Alpha6 produced in May = 1900 units

X442 used in production of Alpha6 = 1900*2 = 3800 kilos

Zeta7:

Standard quantity of X442 in Zeta7 = 4 kilos

Quantity of Zeta7 produced in May = 1300 units

X442 used in production of Zeta7 = 1300*4 = 5200 kilos

2. Direct Material – Y661:

Alpha6:

Standard Quantity of Y661 in Alpha6 = 1.5 litres

Quantity of Alpha6 produced in May = 1900 units

Y661 used in production of Alpha6 = 1900*1.5 = 2850 litres

Zeta7:

Standard Quantity of Y661 in Zeta7 = 3 litres

Quantity of Zeta7 produced in May = 1300 units

Y661 used in production of Zeta7 = 1300*3 = 3900 litres

3. Direct Labour – Sintering:

Alpha6:

Standard Time of Sintering in Alpha6 = 0.3 hours

Quantity of Alpha6 produced in May = 1900 units

Sintering time used in production of Alpha6 = 1900*0.3 = 570 hours

Zeta7:

Standard Time of Sintering in Zeta7 = 0.4 hours

Quantity of Zeta7 produced in May = 1300 units

Sintering time used in production of Zeta7 = 1300*0.4 = 520 hours

4. Direct Labour – Finishing:

Alpha6:

Standard Time of Finishing in Alpha6 = 0.9 hours

Quantity of Alpha6 produced in May = 1900 units

Finishing time used in production of Alpha6 = 1900*0.9 = 1710 hours

Zeta7:

Standard Time of Finishing in Zeta7 = 1.0 hours

Quantity of Zeta7 produced in May = 1300 units

Finishing time used in production of Zeta7 = 1300*1.0 = 1300 hours

Answer No. 2:

Direct Material Variances – X442:

Materials Price Variance

1800 (WN5)

Unfavorable

Materials Quantity Variance

410 (WN6)

Favorable

Direct Material Variances – Y661:

Materials Price Variance

675 (WN7)

Favorable

Materials Quantity Variance

11305 (WN8)

Unfavorable

Working Notes (Please note that a negative sign in the following answers signifies “Unfavorable” position):-

5. Price Variance – X442:

Standard quantity for X442 in production of both Alpha6 and Zeta7 = 3800 + 5200 = 9000 kilos

Standard Price for X442 = 3.9

Actual Price for X442 = Total Actual Cost/Actual Quantity Purchased = 59040/14400 = 4.1

Price Variance = Standard Quantity * (Standard Price – Actual Price) = 9000*(3.9-4.1) = -1800

6. Quantity Variance – X442:

Actual Price of X442 = 4.1

Standard Quantity for X442 = 9000 kilos

Actual Quantity used in production = 8900 kilos (given in the question)

Quantity variance = Actual Price*(Standard Quantity – Actual Quantity) = 4.1*(9000-8900) = 410

7. Price Variance – Y661:

Standard quantity for Y661 in production of both Alpha6 and Zeta7 = 2850 + 3900 = 6750 litres

Standard Price for Y661 = 1.8

Actual Price for Y661 = Total Actual Cost/Actual Quantity Purchased = 26180/15400 = 1.7

Price Variance = Standard Quantity * (Standard Price – Actual Price) = 6750*(1.8-1.7) = 675

8. Quantity Variance – Y661:

Actual Price of Y661 = 1.7

Standard Quantity for Y661 = 6750 litres

Actual Quantity used in production = 13400 litres (given in the question)

Quantity variance = Actual Price*(Standard Qty. – Actual Qty.) = 1.7*(6750-13400) = -11305

Answer No. 3:-

Direct Labor Variances – Sintering:

Labor Rate Variance

3161 (WN9)

Unfavorable

Labor Efficiency Variance

2519 (WN10)

Unfavorable

Direct Labor Variances – Finishing:

Labor Rate Variance

6020 (WN11)

Unfavorable

Labor Efficiency Variance

2520 (WN12)

Favorable

Working Notes:- Please note that a negative sign in the following answers signifies “Unfavorable” position.

9. Rate Variance – Sintering:

Standard time for Sintering in production of both Alpha6 and Zeta7 = 570 + 520 = 1090 hours

Standard Rate for Sintering = 20

Actual rate for Sintering = Total Actual Cost/Actual hours worked = 27480/1200 = 22.9

Rate Variance = Standard hours * (Standard rate – Actual rate) = 1090*(20-22.9) = -3161

10. Efficiency Variance – Sintering:

Actual rate of Sintering = 22.9

Standard hours for Sintering = 1090 hours

Actual hours worked = 1200 hours (given in the question)

Efficiency variance = Actual rate*(Standard hours – Actual hours) = 22.9*(1090-1200) = -2519

11. Rate Variance – Finishing:

Standard hours for Finishing in production of both Alpha6 and Zeta7 = 1710 + 1300 = 3010 hours

Standard rate for Finishing = 19

Actual rate for Finishing = Total Actual Cost/Actual hours worked = 60690/2890 = 21

Rate Variance = Standard hours * (Standard rate – Actual rate) = 3010*(19-21) = -6020

12. Efficiency Variance – Finishing:

Actual rate of Finishing = 21

Standard hours for Finishing = 3010 hours

Actual hours worked = 2890 hours (given in the question)

Efficiency variance = Actual rate * (Standard hours – Actual hours) = 21*(3010-2890) = 2520

Standard Quantity or Hours

Standard Price or Rate

Standard Cost

Alpha6:

Direct Material – X442

3800 (WN1)

Kilos

3.9

Per kilo

14820

Direct Material – Y661

2850 (WN2)

Litres

1.8

Per litre

5130

Direct Labor – Sintering

570 (WN3)

Hours

20

Per hour

11400

Direct Labour - Finishing

1710 (WN4)

Hours

19

Per hour

32490

Total

63300

Zeta7:

Direct Material – X442

5200 (WN1)

Kilos

3.9

Per kilo

20280

Direct Material – Y661

3900 (WN2)

Litres

1.8

Per litre

7020

Direct Labor – Sintering

520 (WN3)

Hours

20

Per hour

10400

Direct Labour - Finishing

1300 (WN4)

Hours

19

Per hour

24700

Total

62400

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