Problem 10-14 Basic Variance Analysis [LO10-1, LO10-2, LO10-3] Becton Labs, Inc.

Question

Problem 10-14 Basic Variance Analysis [LO10-1, LO10-2, LO10-3]

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, 2,500 ounces of material remained in ending inventory.

The company employs 35 lab technicians to work on the production of Fludex. During November, they worked an average of 160 hours at an average rate of $12 per hour.

Variable manufacturing overhead is assigned to Fludex on the basis of direct labor-hours. Variable manufacturing overhead costs during November totaled $18,200.

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).)

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).)

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).)

In the past, the 35 technicians employed in the production of Fludex consisted of 20 senior technicians and 15 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. (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).)

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) for direct materials a. price and quantity variance Standard - Actual * Actual = Variance price price quantiy materials price variance 20 18.75 12,000 = 15000 F standard - Actual * Standard = Variance qty qty price materials quantity variance 9375 9,500 20 2500 U b. yes 2) for direct labor Standard - Actual * Actual = Variance rate rate hours labor price variance 12.5 12 5600 = 2800 F standard - Actual * Standard = Variance hours hours rate labor efficiency variance 5250 5,600 12.5 4375 U b. no 3) for variable overhead Standard - Actual * Actual = Variance rate rate hours Variable overhead rate 3.5 3.25 5,600 = 1400 F standard - Actual * Standard = Variance hours hours rate variable overhead efficiency 5250 5,600 3.5 1225 U

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