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 $23.00 per hour in Sintering and $21.50 per hour in Finishing.

During May, 1,320 direct labor-hours were worked in Sintering at a total labor cost of $32,340, and 2,980 direct labor-hours were worked in Finishing at a total labor cost of $70,030.

Production during May was 1,900 Alpha6s and 900 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 3.0 kilos 3.0 liters 0.30 hours 1.10 hours Zeta7 5.0 kilos 5.0 liters 0.40 hours 1.20 hours

Explanation / Answer

1. the standard cost card for each product, showing the standard cost of direct materials and direct labor. Standard Qty or Hour Standard Price Standard Cost Alpha6 Zeta7 Alpha6 Zeta7 Direct Material X442 3 5 2.7 8.1 13.5 Direct Material Y661 3 5 1.7 5.1 8.5 Direct Labor Sintering 0.3 0.4 23 6.9 9.2 Direct Labor Finishing 1.1 1.2 21.5 23.65 25.8 Total Cost 43.75 57 2. the materials price and quantity variances for each material. Standard Actual Price Varaince Quantity Variance Quantity Rate Value Quantity Rate (See working below-2) Value (Standar Rate-Actual Rate)*Purchase Quantity (Actual Q-Standard Q)*Standard Price X442 (see below working-1) 10200 2.7 27540 9800 2.9 28420 -3060 -1080 Y661 (see below working-1) 10200 1.7 17340 14300 1.6 22880 1630 6970 20400 44880 24100 51300 Rawmaterial Required: 1 Standard Per Unit required Standard total Unit required Production X442 Y661 X442 Y661 Alpha6 1900 3 3 5700 5700 Zeta7 900 5 5 4500 4500 Total 10200 10200 Working: 2 Purchase Purchase Cost Per unit X442 15300 44370 2.9 Y661 16300 26080 1.6 2.the labor rate and efficiency variances for each operation. Standard Actual Labor Rate Labor Efficiency Hour Rate Value Hour Rate (See working below-2) Value (Standar Rate-Actual Rate)*Purchase Quantity (Actual Q-Standard Q)*Standard Price Sintring (see below working-1) 930 23 21390 1320 24.5 32340 -1980 8970 Finishing (see below working-1) 3170 21.5 68155 2980 23.5 70030 -5960 -4085 4100 89545 4300 102370 Working: 1 Standard Per Unit required Standard total Unit required Production Sintering Finising Sintering Finising Alpha6 1900 0.3 1.1 570 2090 Zeta7 900 0.4 1.2 360 1080 Total 930 3170 Working: 2 Hour Total Labor Cost Per Hour Sintering 1320 32340 24.5 Finishing 2980 70030 23.5

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