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 Sintering 0.40 hours 0. 10 hours Finishing 0.80 hours 0.60 hours Product X442 Y661 Alpha6 Zeta7 1.2 kilos 3.0 kilos 2.0 liters 4.0 liters Information relating to materials purchased and materials used in production during May follows: Material X442 standard Price $ 4.00 per kilo $ 1.90 per liter Purchases Purchase Cost $ 60,900 $ 27,900 Used in Production 14,500 kilos 15,500 liters 9,000 kilos 13,500 liters Y661 The following additional information is available: a. The company recognizes price variances when materials are purchased. b. The standard labor rate is $21.00 per hour in Sintering and $19.50 per hour in Finishing. c. During May, 1,250 direct labor-hours were worked in Sintering at a total labor cost of $28,750, and 2,900 direct labor-hours were worked in Finishing at a total labor cost of $62,350. d. Production during May was 2,000 Alpha6s and 2,250 Zeta7s.
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 Sintering 0.40 hours 0. 10 hours Finishing 0.80 hours 0.60 hours Product X442 Y661 Alpha6 Zeta7 1.2 kilos 3.0 kilos 2.0 liters 4.0 liters Information relating to materials purchased and materials used in production during May follows: Material X442 standard Price $ 4.00 per kilo $ 1.90 per liter Purchases Purchase Cost $ 60,900 $ 27,900 Used in Production 14,500 kilos 15,500 liters 9,000 kilos 13,500 liters Y661 The following additional information is available: a. The company recognizes price variances when materials are purchased. b. The standard labor rate is $21.00 per hour in Sintering and $19.50 per hour in Finishing. c. During May, 1,250 direct labor-hours were worked in Sintering at a total labor cost of $28,750, and 2,900 direct labor-hours were worked in Finishing at a total labor cost of $62,350. d. Production during May was 2,000 Alpha6s and 2,250 Zeta7s.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
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1. Complete the
2. Compute the materials price and quantity variances for each material.
3. Compute the labor rate and efficiency variances for each operation.
Transcribed Image Text: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
Alpha6
Zeta7
Sintering
0.40 hours
0.10 hours
Finishing
0.80 hours
0.60 hours
X442
Y661
2.0 liters
4.0 liters
1.2 kilos
3.0 kilos
Information relating to materials purchased and materials used in production during May follows:
Purchases
14,500 kilos
15,500 liters
Standard Price
$ 4.00 per kilo
$ 1.90 per liter
Used in Production
9,000 kilos
13,500 liters
Material
Purchase Cost
$ 60,900
$ 27,900
X442
Y661
The following additional information is available:
a. The company recognizes price variances when materials are purchased.
b. The standard labor rate is $21.00 per hour in Sintering and $19.50 per hour in Finishing.
c. During May, 1,250 direct labor-hours were worked in Sintering at a total labor cost of $28,750, and 2,900 direct labor-hours were
worked in Finishing at a total labor cost of $62,350.
d. Production during May was 2,000 Alpha6s and 2,250 Zeta7s.
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