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 X442 Y661 Sintering Finishing
Alpha6 1.8 kilos 2.0 liters 0.20 hours 0.80 hours
Zeta7 3.0 kilos 4.5 liters 0.35 hours 0.90 hours


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


Material Purchases Purchase Cost Standard
Price Used in
Production
X442 14,500 kilos $52,200 $3.50 per kilo 8,500 kilos
Y661 15,500 liters $20,925 $1.40 per liter 13,000 liters


The following additional information is available:
a. The company recognizes price variances when materials are purchased.
b. The standard labor rate is $19.80 per hour in Sintering and $19.20 per hour in Finishing.
c.
During May, 1,200 direct labor-hours were worked in Sintering at a total labor cost of $27,000, and 2,850 direct labor-hours were worked in Finishing at a total labor cost of $59,850.

d. Production during May was 1,500 Alpha6s and 2,000 Zeta7s.


Requied:
1.
Complete the standard cost card for each product, showing the standard cost of direct materials and direct labor. (Round your answers to 2 decimal places.)



2.
Compute the materials price and quantity variances for each material. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Round your answers to 2 decimal places.)




3.
Compute the labor rate and efficiency variances for each operation. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Round your answers to 2 decimal places.)

Answer 1

The standard cost for Alpha 6 equals $28.42 and $41.01 for Zeta 7.

What is the the standard cost card for each product?

Alpha 6

Direct materials- (X442) 1.8 Kilos 3.50          6.30

Direct materials- (Y661) 2.0 Liters 1.40         2.80

Direct labor- (Sintering) 0.20 Hours 19.80    3.96

Direct labor- (Finishing) (0.80) Hours 19.20  15.36

Total                                                                 28.42

Zeta 7

Direct materials- (X442) 3.0 Kilos 3.50        10.50

Direct materials- (Y661) 4.5 Liters 1.40         6.30

Direct labor- (Sintering) 0.35 Hours 19.80   6.93

Direct labor- (Finishing) 0.90 Hours 19.20   17.28

Total                                                                41.01

What are the materials price and quantity variances?

Alpha 6

Direct Materials Variances- Materials X442:

Actual price = $52200/14500

Actual price = $3.60

Materials price variance= (Standard price-Actual price)*Actual quantity

Materials price variance= (3.50-3.60)*14500

Materials price variance= $1450 U

Standard quantity= (1.81500)+(3.02000)

Standard quantity= 8700

Materials quantity variance= (Standard quantity-Actual quantity)*Standard price

Materials quantity variance = (8700-8500)*$3.50

Materials quantity variance= $700 F

Zeta 7

Direct Materials Variances- Materials Y661:

Actual price = $20925/15500

Actual price = $1.35

Materials price variance = (Standard price-Actual price)*Actual quantity

Materials price variance = (1.40-1.35)*15500

Materials price variance = $775 F

Standard quantity = (2.01500)+(4.52000)

Standard quantity = 12000

Materials quantity variance = (Standard quantity-Actual quantity)*Standard price

Materials quantity variance = (12000-13000)*$1.40

Materials quantity variance = $1400 U

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