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 liters 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 Used in Production 8,900 kilos 13,400 liters Standard Price Purchase Cost $59,040 $3.90 per kilo $26,180 $1.80 per liter Material X442 Y661 Purchases 14,400 kilos 15,400 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

2). Direct material price variance at the time of purchase = (Std cost for actual purchase - Actual cost of purchase)
Material X442 = (3.90*14400 - 59040) = 2880 U
Material Y661 = (1.80*15400 - 26180) = 1540 F

Direct Matrial Qty variance = (Std qty for Actual production - Actual Qty )* Std. rate
Material X442 = Std qty for actual production = (1900 alpha * 2.0 kilos ) + (1300 zeta * 4.0 kilo) = 9000 kilo
Material Qty Variance = (9000 kilo - 8900 kilo)*3.90 = 390 F

Material Y661 : Std qty for actual production = (1900 alpha * 1.5 ltr) + (1300 zeta* 3.0 ltr) = 6750 ltrs
Materila Qty variance = (6750 - 13400)*1.8 = 11970 U

3). Direct Labour rate Variance= Std cost for actual hrs worked - actual cost
Sintering = (1200 hrs * 20.0) - 27480 = 3480 U
Finishing = (2890hrs * 19.0) - 60690 = 5780 U

Direct Labour Efficiency variance = (Std hrs for actual production - Actual hrs) * Std rate
Sintering = Std hrs for actual production = (1900 alphs * 0.30 hrs ) + (1300 zeta * 0.40 hrs) = 1090 hrs
               Labour Efficiency variance = (1090 hrs - 1200 hrs)*20.0 = 2200 U
Finishing = Std hrs for actual production = (1900 alphas * 0.9 hrs) + (1300 zeta * 1 hrs) = 3010 hrs
               Labour Efficiency Variance = (3010 hrs- 2890 hrs)*19 = 2280 F

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