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, 3,150 ounces of material remained in ending inventory.

The company employs 17 lab technicians to work on the production of Fludex. During November, they worked an average of 160 hours at an average rate of $11.50 per hour.

Variable manufacturing overhead is assigned to Fludex on the basis of direct labor-hours. Variable manufacturing overhead costs during November totaled $3,000.

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 17 technicians employed in the production of Fludex consisted of 4 senior technicians and 13 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).)

      

Standard Quantity Standard Price
or Rate Standard Cost   Direct materials    2.30 ounces $ 17.00 per ounce $ 39.10      Direct labor    0.60 hours $ 13.00 per hour    7.80      Variable manufacturing overhead    0.60 hours $ 2.50 per hour    1.50         $ 48.40        

Explanation / Answer

Material Price variance = (Standard price - Actual Price ) * Actual quantity

= (17-15.55)*11500 = 16675 F

Material Quantity Variance = (Standard Quantity - Actual Quantity ) * Standard Price

= (8050-8350)*17 = 5100 UF

Labor rate variance = (Standard Rate - Actual Rate )*Actual Hours

= (13-11.50) * 2720 = 4080 F

Labour Efficiency Variance = (Standard Hours - Actual Hours)*Standard Rate

= (2100-2720)*13 = 8060 UF

Variable overhead rate vaiance = (Standard rate - Actual Rate ) * Actual Hours.

= (2.50-1.10) * 2720 = 3808 F

Variable overhead Efficiency variacne = (Standard Hours- Actual hours) *Standard rate

= (2100-2720) * 2.50 = 1550 UF

Working

1) Actual Price in Material Price Variance = 178825/11500 = 15.55

2) Standard Quantity in Material Quantity Variance = 3500*2.3 = 8050

3) Actual Quantity in Material Quantity Variance = 11500 - 3150 = 8350

4) Actual Hours in Labor Rate Variance/Labor efficiency Variance = 17*160 = 2720

5) Standard Hours in Labor efficiency Variance/Variable Overhead efficiency Variance = 0.60*3500 = 2100

6) Actual Rate in Variable Overhead Rate Variance = 3000/2720 = 1.10

Related Questions

Navigate

• Browse (All)
• Browse B
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.