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 Price or Rate $28.00 per ounce $13.00 per hour S 3.60 per hour Standard Standard Quantity Cost Direct materials Direct labor Variable manufacturing overhead 2.50 ounces 0.50 hours 0.50 hours S 70.00 6.50 1.80 $ 78.30 During November, the following activity was recorded relative to production of Fludex: a. Materials purchased, 13,500 ounces at a cost of $361,800 b. There was no beginning inventory of materials; however, at the end of the month, 2,900 ounces of C. The company employs 21 lab technicians to work on the production of Fludex. During November, they d. Variable manufacturing overhead is assigned to Fludex on the basis of direct labor-hours. Variable e. During November, 4,200 good units of Fludex were produced material remained in ending inventory worked an average of 140 hours at an average rate of $11.50 per hour manufacturing overhead costs during November totaled $4,400 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).) Materials price variance Materials quantity variance

Explanation / Answer

1-a) Material price variance AP (a) SP (b) Variance (c=b-a) AQ (d) Total variance (e=c*d) F/U Material price variance = (AP-SP)*AQ AP = Actual price per unit = 361800/13500 = $26.8 SP = Standard price per unit = $28 AQ = Actual quantity consumed= 13500-2900 = 10600 F= Favourable U = Unfavourable Material price variance AP (a) SP (b) Variance (c=b-a) AQ (d) Total variance (e=c*d) F/U 26.8 28 1.2 10600 12720 F Material quantity variance AQ (a) SQ (b) Variance (c=b-a) SP (d) Total variance (e=c*d) F/U Material quantity variance = (AQ-SQ)*SP AQ = Actual quantity consumed= 10600 SQ = Standard quantity = 4200*2.5 = 10500 SP = Standard price per unit = $28 F= Favourable U = Unfavourable Material quantity variance AQ (a) SQ (b) Variance (c=b-a) SP (d) Total variance (e=c*d) F/U 10600 10500 -100 28 -2800 U 1-b) No 2-a) Labor Rate variance AR (a) SR (b) Variance (c=b-a) AH (d) Total variance (e=c*d) F/U Labor Rate variance = (AR-SR)*AH AR = Actual Rate per hour = $11.5 SR = Standard Rate per hour = $13 AH = Actual hours = 140*21 = 2940 F= Favourable U = Unfavourable Labor Rate variance AR (a) SR (b) Variance (c=b-a) AH (d) Total variance (e=c*d) F/U 11.5 13 1.5 2940 4410 F Labor Efficiency variance AH (a) SH (b) Variance (c=b-a) AR (d) Total variance (e=c*d) F/U Labor Efficiency variance = (AH-SH)*AR AH = Actual hours = 2940 SH = Standard Hours = 4200*0.5 = 2100 SR = Standard Rate per hour = $13 F= Favourable U = Unfavourable Labor Efficiency variance AH (a) SH (b) Variance (c=b-a) SR (d) Total variance (e=c*d) F/U 2940 2100 -840 13 -10920 U 2-b) No. because the present employees itself cannot meet the standard hours (unfavourable material efficiency variance) 3) VOH spending variance AR (a) SR (b) Variance (c=b-a) Hours (d) Total variance (e=c*d) F/U                     1.50 3.6                          2.10 2940 6184 F (4400/2940) VOH efficiency variance AH (a) SH (b) Variance (c=b-a) Price (d) Total variance (e=c*d) F/U 2940 2100 -840 3.6 -3024 U (4200*0.5)

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