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 2.4 liters 0.20 hours 1.20 hours Zeta7 4.4 kilos 4.4 liters 0.40 hours 0.80 hours Information relating to materials purchased and materials used in production during May follows: Material Purchases Purchase Cost Standard Price Used in Production X442 15,100 kilos $40,770 $2.50 per kilo 9,600 kilos Y661 16,100 liters $22,540 $1.50 per liter 14,100 liters The following additional information is available: The company recognizes price variances when materials are purchased. The standard labor rate is $22.00 per hour in Sintering and $21.50 per hour in Finishing. During May, 1,300 direct labor-hours were worked in Sintering at a total labor cost of $30,680, and 2,960 direct labor-hours were worked in Finishing at a total labor cost of $69,560. Production during May was 1,700 Alpha6s and 1,550 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
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
Problem 9-21 Multiple Products, Materials, and Processes [LO9-4, LO9-5]
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
| Raw Material | Standard Labor Time | ||||
| Product | X442 | Y661 | Sintering | Finishing | |
| Alpha6 | 1.8 kilos | 2.4 liters | 0.20 hours | 1.20 hours | |
| Zeta7 | 4.4 kilos | 4.4 liters | 0.40 hours | 0.80 hours | |
Information relating to materials purchased and materials used in production during May follows:
| Material | Purchases | Purchase Cost | Standard Price |
Used in Production |
|||
| X442 | 15,100 | kilos | $40,770 | $2.50 | per kilo | 9,600 | kilos |
| Y661 | 16,100 | liters | $22,540 | $1.50 | per liter | 14,100 | liters |
The following additional information is available:
- The company recognizes price variances when materials are purchased.
-
The standard labor rate is $22.00 per hour in Sintering and $21.50 per hour in Finishing.
-
During May, 1,300 direct labor-hours were worked in Sintering at a total labor cost of $30,680, and 2,960 direct labor-hours were worked in Finishing at a total labor cost of $69,560.
-
Production during May was 1,700 Alpha6s and 1,550 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.
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