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	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

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

Material	Purchases		Purchase Cost	Standard Price		Used in Production
X442	15,300	kilos	$44,370	$2.70	per kilo	9,800	kilos
Y661	16,300	liters	$26,080	$1.70	per liter	14,300	liters

The following additional information is available:

1. The company recognizes price variances when materials are purchased.

2. The standard labor rate is $23.00 per hour in Sintering and $21.50 per hour in Finishing.

3. 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.

4. 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.

Answer 1

Answer 1

Standard cost card
Product Name			Alpha 6
	Cost per Quantity		Quntity	Cost
Direct Material
Material X442	$       2.70	Kilo	3.0	$       8.10
Material Y661	$       1.70	Litre	3.0	$       5.10
Total Direct Material				$    13.20
Direct Labor
Labor Sintering	$    23.00	Hours	0.30	$       6.90
Labor Finishing	$    21.50	Hours	1.10	$    23.65
Total Direct Labor				$    30.55
Total Standard Cost				$    43.75
Standard cost card
Product Name			Zeta 7
	Cost per Quantity		Quntity	Cost
Direct Material
Material X442	$       2.70	Kilo	5.0	$    13.50
Material Y661	$       1.70	Litre	5.0	$       8.50
Total Direct Material				$    22.00
Direct Labor
Labor Sintering	$    23.00	Hours	0.40	$       9.20
Labor Finishing	$    21.50	Hours	1.20	$    25.80
Total Direct Labor				$    35.00
Total Standard Cost				$    57.00

Answer 2

	Standard quantity of cocoa in Pounds based on actual production
	Alpha (1900*3)	5,700
	Zeta (900*5)	4,500
	Standard quantity	10,200
	Minus sign indicate Favorable variance.
	Material Name:- X442
	Measure	Kilo
	Standard price per Kilo	$            2.70
44370/15300	Actual price per Kilo	$            2.90
	Standard quantity in Kilos	10,200
	Actual quantity purchased in Kilos	15,300
	Actual quantity used in Kilos	9,800
	Actual price per Kilo	2.90
Less	Standard price per Kilo	-2.70
	Difference	0.20
Multiply	Actual quantity purchased in Kilos	15300
	Direct Material price variance	$          3,060
	Indicate	Unfavorable
	Actual quantity used in Kilos	9800
Less	Standard quantity in Kilos	-10200
	Difference	-400
Multiply	Standard price per Kilo	2.70
	Direct materials quantity variance	$        (1,080)
	Indicate	Favorable

	Standard quantity of sugar in Pounds based on actual production
	Alpha (1900*3)	5,700
	Zeta (900*5)	4,500
	Standard quantity	10,200
	Minus sign indicate Favorable variance.
	Material Name:- Y661
	Measure	Pound
	Standard price per Pound	$           1.70
26080/16300	Actual price per Pound	$           1.60
	Standard quantity in Pounds	10,200
	Actual quantity purchased in Pounds	16,300
	Actual quantity used in Pounds	14,300
	Actual price per Pound	1.60
Less	Standard price per Pound	-1.70
	Difference	-0.10
Multiply	Actual quantity purchased in Pounds	16300
	Direct Material price variance	$      (1,630)
	Indicate	Favorable
	Actual quantity used in Pounds	14300
Less	Standard quantity in Pounds	-10200
	Difference	4100
Multiply	Standard price per Pound	1.70
	Direct materials quantity variance	$         6,970
	Indicate	Unfavorable

Your answer
Materials	Material Name:- X442	Material Name:- Y661	Total	Indicate
Direct Material price variance	$    3,060	$     (1,630)	$    1,430	Unfavorable
Direct materials quantity variance	$ (1,080)	$       6,970	$    5,890	Unfavorable
Material Total Cost variance	$    1,980	$       5,340	$    7,320	Unfavorable

Answer 3

Sintering
	Minus sign indicate Favorable variance.
	Measure	Hour
	Standard rate per Hour	$     23.00
32340/1320	Actual rate per Hour	$     24.50
((1900*0.30)+(900*0.40))	Standard labor Hours	930
	Actual labor Hours	1,320
	Actual rate per Hour	24.50
Less	Standard rate per Hour	-23.00
	Difference	1.50
Multiply	Actual labor Hours	1320
	Direct Labor rate variance	$     1,980
	Indicate	Unfavorable
	Actual labor Hours	1320
Less	Standard labor Hours	-930
	Difference	390
Multiply	Standard rate per Hour	23.00
	Direct Labor time (efficiency) variance	$     8,970
	Indicate	Unfavorable

Finishing
	Minus sign indicate Favorable variance.
	Measure	Hour
	Standard rate per Hour	$    21.50
70030/2980	Actual rate per Hour	$    23.50
((1900*1.10)+(900*1.20))	Standard labor Hours	3,170
	Actual labor Hours	2,980
	Actual rate per Hour	23.50
Less	Standard rate per Hour	-21.50
	Difference	2.00
Multiply	Actual labor Hours	2980
	Direct Labor rate variance	$    5,960
	Indicate	Unfavorable
	Actual labor Hours	2980
Less	Standard labor Hours	-3170
	Difference	-190
Multiply	Standard rate per Hour	21.50
	Direct Labor time (efficiency) variance	$ (4,085)
	Indicate	Favorable

Your answer
Type	Sintering	Finishing	Total	Indicate
Direct Labor rate variance	$    1,980	$    5,960	$    7,940	Unfavorable
Direct Labor time (efficiency) variance	$    8,970	$ (4,085)	$    4,885	Unfavorable
Direct Labor cost variance	$ 10,950	$    1,875	$ 12,825	Unfavorable