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 3.0 kilos 5.0 kilos Y661 2.0 liters 5.0 liters Sintering 0.40 hours 0.50 hours Finishing 1.00 hours 1.20 hours Information relating to materials purchased and materials used in production during May follows Material X442 Y661 Purchase Cost 15,700 kilos $51,810 3.10 per kilo Standard Price sed in Production Purchases 10,200 kilos 16,700 liters $20,040 $1.30 per liter 14,700 liters The following additional information is available a. The company recognizes price variances when materials are purchased b. The standard labor rate is $23.00 per hour in Sintering and $21.50 per hour in Finishing C. During May, 1,450 direct labor-hours were worked in Sintering at a total labor cost of $35,090, and 3,020 direct labor-hours were worked in Finishing at a total labor cost of $70,970 d. Production during May was 2,300 Alpha6s and 700 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

Explanation / Answer

Solution 1:

Solution 2:

Material variance - X442:

Standard quantity of material = 2300*3 + 700*5 = 10400 Kilo

Actual quantity of material purchased = 15700 Kilo

Actual quantity of material consumed = 10200 Kilo

Standard price of material = $3.10

Actual price of material = $51,810 / 15700 = $3.30

Material price variance = (SP - AP) * AQ Purchased = ($3.10 - $3.30) * 15700 = $3,140 U

Material quantity variance = (SQ - AQ) * SP = (10400 - 10200) * $3.10 = $620 F

Material variance - Y661:

Standard quantity of material = 2300*2 + 700*5 = 8100 Litre

Actual quantity of material purchased = 16700 ltr

Actual quantity of material consumed = 14700 Kilo

Standard price of material = $1.30

Actual price of material = $20,040 / 16700 = $1.20

Material price variance = (SP - AP) * AQ Purchased = ($1.30 - $1.20) * 16700 = $1,670 F

Material quantity variance = (SQ - AQ) * SP = (8100 - 14700) * $1.30 = $8,580 U

Solution 3:

Direct labor variance - Sintering:

Standard hours of labor = 2300*0.4 + 700*0.5 = 1270 hours

Actual hours of labor = 1450 hours

Standard rate of labor = $23 per hour

Actual rate of labor = $35,090 / 1450 = $24.20

Direct labor rate variance = (SR - AR) * AH = ($23 - $24.20) * 1450 = $1,740 U

Direct labor efficiency variance = (SH - AH) * SR = (1270 - 1450) * $23 = $4,140  U

Direct labor variance - finishing:

Standard hours of labor = 2300*1 + 700*1.2 = 3140 hours

Actual hours of labor = 3020 hours

Standard rate of labor = $21.50 per hour

Actual rate of labor = $70,970 / 3020 = $23.50

Direct labor rate variance = (SR - AR) * AH = ($21.50 - $23.50) * 3020 = $6,040 U

Direct labor efficiency variance = (SH - AH) * SR = (3140 - 3020) * $21.50 = $2,580  F

Standard cost card - Alpha 6 Particulars Per unit cost Direct Material: X442 (3*$3.10) $9.30 Y661 (2*$1.30) $2.60 Direct Labor: Sintering (0.4*$23) $9.20 Finishing (1*$21.50) $21.50 Total $42.60

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