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):

Information relating to materials purchased and materials used in production during May follows:

The following additional information is available:

The company recognizes price variances when materials are purchased.

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

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.

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.

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

Explanation / Answer

1. Standard cost card for each product

2. Materials price and quantity variances

Direct Material Price Variance: Actual Quantity x Actual Price - Actual Quantity x Standard Price

Direct materials quantity variance = (Actual quantity used × Standard rate) – (Standard quantity allowed × Standard rate)

3. labor rate and efficiency variances

Direct Labor Rate Variance: Actual HRS x Actual Rate - Actual HRS x Standard Rate

Direct Labor Effciency Variance: Actual Hours x Standard Rate - Standard Hours x Standard Rate

Standerd Quantity or Hours Standerd Price or Rate Standerd Cost Alpha6 Raw Material - X442 2.00 Kilos 4.30 Per Kilos 8.60 Raw Material - Y661 1.50 Liter 1.60 Per Liter 2.40 Labor Time - Sintering 0.10 Hrs 22.00 Per Hrs 2.20 Labor Time - Finishing 0.80 Hrs 21.00 Per Hrs 16.80 Total Standerd Cost 30.00 Zeta7 Raw Material - X442 3.00 Kilos 4.30 Per Kilos 12.90 Raw Material - Y661 2.50 Liter 1.60 Per Liter 4.00 Labor Time - Sintering 0.45 Hrs 22.00 Per Hrs 9.90 Labor Time - Finishing 0.90 Hrs 21.00 Per Hrs 18.90 Total Standerd Cost 45.70

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