Becton Labs, Inc., produces various chemical compounds for industrial use. One c

Question

Becton Labs, Inc., produces various chemical compounds for industrial use. One compound, called Fludex, is prepared using an elaborate distilling process. The company has developed standard costs for one unit of Fludex, as follows:

There was no beginning inventory of materials; however, at the end of the month, 2,700 ounces of material remained in ending inventory.

The company employs 12 lab technicians to work on the production of Fludex. During November, they worked an average of 140 hours at an average rate of $14.50 per hour.

Variable manufacturing overhead is assigned to Fludex on the basis of direct labor-hours. Variable manufacturing overhead costs during November totaled $4,800.

Compute the price and quantity variances. (Round your "price per ounce" answers to 2 decimal places. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).)

Compute the rate and efficiency variances. (Round your "rate per hour" answers to 2 decimal places. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).)

In the past, the 12 technicians employed in the production of Fludex consisted of 5 senior technicians and 7 assistants. During November, the company experimented with fewer senior technicians and more assistants in order to save costs. Would you recommend that the new labor mix be continued?

Compute the variable overhead rate and efficiency variances. (Round your "rate per hour" answers to 2 decimal places. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).)

Becton Labs, Inc., produces various chemical compounds for industrial use. One compound, called Fludex, is prepared using an elaborate distilling process. The company has developed standard costs for one unit of Fludex, as follows:

Explanation / Answer

1)

a)

1) Materials price variance = (Actual price - Standard Price) *Actual Quantity

Materials price variance = (6.45-7)*7100

Materials price variance = $ 3905 Favorable

2). Materials quantity variance = (Actual Quantity Used- Standard Quantity)Standard Price

Materials quantity variance = ((7100-2700)- 1.2*2800)*7

Materials quantity variance = (4400-3360)*7

Materials quantity variance = $ 7280 Unfavorable

b)

Yes

2)

a)

1) Labor rate variance = (Actual Rate-Standard Rate)*Actual Hour

Labor rate variance = (14.50-14)*(12*140)

Labor rate variance = $ 840 Unfavorable

2) Labor efficiency variance = (Actual Hour-Standard Hour )Standard Rate

Labor efficiency variance = ( 12*140- 0.7*2800)*14

Labor efficiency variance = 3920 Favorable

b)

Yes

Since Labor efficiency variance is favorable that denotes that after change in technician the performance is good

3)

1) Variable Overhead rate variance = (Actual Rate*Actual Hour -Standard Rate*Actual Hour )

Variable Overhead rate variance = (4800 - 3*12*140)

Variable Overhead rate variance = $ 240 favorable

2) Variable Overhead efficiency variance =(Actual Hour-Standard Hour )Standard Rate

Variable Overhead efficiency variance = (12*140-0.7*2800)*3

Variable Overhead efficiency variance = 840 Favorable

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