# Mickley Corporation produces two products, Alpha6s and Zeta7s, which pass through two operations,...

## 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 | 2.0 kilos | 1.5 litres | 0.10 hours | 0.80 hours | |

Zeta7 | 3.0 kilos | 2.5 litres | 0.45 hours | 0.90 hours |

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

Material | Purchases | Purchase Cost | Standard Price | Used in production | ||
---|---|---|---|---|---|---|

X442 | 14,800 kilos | $66,600 | $4.30 | per kilo | 9,300 | kilos |

Y661 | 15,800 liters | $23,700 | $1.60 | per liter | 13,800 | litres |

The following additional information is available:

a) The company recognizes price variances when materials are purchased.

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

c) 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.

d) 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. (Round your answers to 2 decimal places.)

Standard Quantity or Hours | Standard Price or Rate | Standard Cost | |||
---|---|---|---|---|---|

Alpha6: | |||||

Direct Materials - X442 | kilos | per kilo | |||

Direct Materials - Y661 | liters | per liter | |||

Direct Labor - Sintering | hours | per hour | |||

Direct Labor - Finishing | hours | per hour | |||

Total | $0.00 | ||||

Zeta7: | |||||

Direct Materials - X442 | kilos | per kilo | |||

Direct Materials - Y661 | liters | per liter | |||

Direct Labor - Sintering | hours | per hour | |||

Direct Labor - Finishing | hours | per hour | |||

Total | $0.00 |

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.)

Direct Materials Variance - Materials X442 : | ||||||||
---|---|---|---|---|---|---|---|---|

- | * | = | Variance | |||||

Materials Price Variance | 0 | |||||||

- | * | = | Variance | |||||

Materials Quantity Variance | 0 | |||||||

Direct Materials Variance- Materials Y661 : | ||||||||

- | * | = | Variance | |||||

Materials Price Variance | 0 | |||||||

- | * | = | Variance | |||||

Materials Quantity Variance | 0 |

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.)

Direct Labor Variances-Sintering : | ||||||||
---|---|---|---|---|---|---|---|---|

- | * | = | Variance | |||||

Labor Rate Variance | 0 | |||||||

- | * | = | Variance | |||||

Labor Efficiency Variance | 0 | |||||||

Direct Labor Variances-Finishing : | ||||||||

- | * | = | Variance | |||||

Labor Rate Variance | 0 | |||||||

- | * | = | Variance | |||||

Labor Efficiency Variance | 0 |

## Variance:

A variance arises when the actual cost differs from the standard cost. If the actual cost or cost element is *more* than the standard cost, then the variance is said to be unfavorable. But if the actual cost or cost element is *less* than the standard cost, then the variance is said to be favorable. If there's no difference between the actual and standard cost, then there's no variance.

## Answer and Explanation: 1

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**1)** The calculations for the standard cost per unit are as follows:

Standard Quantity or Hours | Standard Price or Rate | Standard Cost | |
---|---|---|---|

Alpha 6: | |||

Dire... |

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#### Learn more about this topic:

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Chapter 13 / Lesson 1Explore standard costs. Learn the definition of standard costing and understand how standard cost differs from variable cost. See standard costing examples.