Required: 1. Complete the standard cost card for each product, showing the standard cost of direct materials and o 2. Compute the materials price and quantity variances for each material. 3. Compute the labor rate and efficiency variances for each operation.
Required: 1. Complete the standard cost card for each product, showing the standard cost of direct materials and o 2. Compute the materials price and quantity variances for each material. 3. Compute the labor rate and efficiency variances for each operation.
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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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
X442
Y661
Sintering
Finishing
Alpha6
3.0 kilos
2.0 liters
0.40 hours
1.00 hours
Zeta7
5.0 kilos
5.0 liters
0.50 hours
1.20 hours
Information relating to materials purchased and materials used in production during May follows:
Purchase
Standard
Used in
Material
Purchases
Cost
Price
Production
15,700 kilos
16,700 liters
$51,810
$20,040
$3.10 per kilo
$1.30 per liter
10,200 kilos
14,700 liters
X442
Y661
The following additional information is available:
a. The company recognizes price variances when materials are purchased.
b. The standard labor rate is $23.00 per hour in Sintering and $21.50 per hour in Finishing.
c. During May, 1,450 direct labor-hours were worked in Sintering at a total labor cost of $35,090, and 3,020 direct labor-hours were
worked in Finishing at a total labor cost of $70,970.
d. Production during May was 2,300 Alpha6s and 700 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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