(Solution) Mickley Corporation produces two products

Mickley Corporation produces two products, Alpha6 and Zeta7, 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 Labour Time
	X442	Y661	Sintering	Finishing
Alpha6	1.8 kgs	2.0 litres	0.20 hrs	0.80 hrs
Zeta7	3.0 kgs	4.5 litres	0.35 hrs	0.90 hrs

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

	Purchases	Purchase Cost	Standard Price		Used in Production
X442	14,500 kgs	$52,200	$3.50	per kg	8,500	kgs
Y661	15,500 litres	$20,925	$1.40	per litre	13,000	litres

The following additional information is available:

1. The company recognizes price variances when materials are purchased.
2. The standard labour rate is $19.80 per hour in Sintering and $19.20 per hour in Finishing.
3. During May, 1,200 direct labour-hours were worked in Sintering at a total labour cost of $27,000, and 2,850 direct labour-hours were worked in Finishing at a total labour cost of $59,850.
4. Production during May was 1,500 Alpha6 and 2,000 Zeta7.

Required:

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

2. Compute the materials price and quantity variances for each material. (Input all amounts as positive values. Indicate the effect of each variance by selecting “F” for favorable, “U” for unfavorable, and “None” for no effect (i.e, zero variance).)

3. Compute the labour rate and efficiency variances for each operation. (Input all amounts as positive values. Indicate the effect of each variance by selecting “F” for favorable, “U” for unfavorable, and “None” for no effect (i.e, zero variance).)

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Solution

	Standard Quantity or Hours		Standard Price or Rate		Standard Cost
Alpha6:
Direct materials-X442	1.8	kgs	3.5	per kg	6.3
Direct materials-Y661	2	litres	1.4	per litre	2.8
Direct labour-Sintering	0.2	hours	19.8	per hour	3.96
Direct labour-Finishing	0.8	hours	19.2	per hour	15.36
Total
Zeta7:
Direct materials-X442	3	kgs	3.5	per kg	10.5
Direct materials-Y661	4.5	litres	1.4	per litre	6.3
Direct labour-Sintering	0.4	hours	19.8	per hour	6.93
Direct labour-Finishing	0.9	hours	19.2	per hour	17.28
Total					41.01

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