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: 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 During November, the following activity was recorded relative to production of Fludex: a. Materials purchased, 11,500 ounces at a cost of $178,825. b. There was no beginning inventory of materials; however, at the end of the month, 3,150 ounces of material remained in ending inventory. c. 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. d. Variable manufacturing overhead is assigned to Fludex on the basis of direct labor-hours. Variable manufacturing overhead costs during November totaled $3,000. e. During November, 3,500 good units of Fludex were produced . Required: 1. For direct materials: a. Compute the price and quantity variances. (Input all amounts as positive values. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e, zero variance).) b. The materials were purchased from a new supplier who is anxious to enter into a long-term purchase contract. Would you recommend that the company sign the contract? Yes No 2. For direct labor: a. Compute the rate and efficiency variances. (Input all amounts as positive values. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e, zero variance).)
b. 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? Yes No
3. Compute the variable overhead rate and efficiency variances. (Input all amounts as positive values. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e, zero variance).)
rev: 06_13_2016_QC_CS-53459 ReferenceseBook & Resources

Explanation / Answer

1) for direct materials a. price and quantity variance Standard - Actual * Actual = Variance price price quantiy materials price variance 17 15.55 11,500 = 16675 F standard - Actual * Standard = Variance qty qty price materials quantity variance 8050 8,350 17 5100 U b. yes 2) for direct labor Standard - Actual * Actual = Variance rate rate hours labor price variance 13 11.5 2720 = 4080 F standard - Actual * Standard = Variance hours hours rate labor efficiency variance 2100 2,720 13 8060 U b. no 3) for variable overhead Standard - Actual * Actual = Variance rate rate hours Variable overhead rate 2.5 1.10 2,720 = 3800 F standard - Actual * Standard = Variance hours hours rate variable overhead efficiency 2100 2,720 2.5 1550 U

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