Becton Labs, Inc., produces various chemical compounds for industrial use. One compound, called Fludex, is prepared...

1.

Direct material price variance = Actual quantity*standard price - Actual quantity*actual price

Direct material price variance = 12,500*$26 - $305,625

Direct material price variance = $325,000 - 305,625 = $19,375 Favorable

Direct material quantity variance = Standard quantity*standard price - Actual quantity*standard price

Direct material quantity variance = (4,200*2.30)*$26 - (12,500-2,800)*$26

Direct material quantity variance = 9,660*$26 - 9,700*$26

Direct material quantity variance = $251,160 - 252,200 = $1,040 Unfavorable

Company should sign the contract with new supplier as material price variance is favorable.

2.

Direct labor rate variance = Actual hours*standard rate - Actual hours*actual rate

Direct labor rate variance = 3,150*$14 - 3,150*$12

Direct labor rate variance = $44,100 - 37,800 = $6,300 Favorable

Direct labor efficiency variance = Standard hours*standard rate - Actual hours*standard rate

Direct labor efficiency variance = (4,200*0.50)*$14 - 3,150*$14

Direct labor efficiency variance = $29,400 - 44,100 = $14,700 Unfavorable

No, the new labor mix should not be continued as though labor rate variance is favorable , labor efficiency variance is unfavorable which results in unfavorable total labor cost variance

3.

Variable overhead rate variance = Actual hours*standard rate - Actual hours*actual rate

Variable overhead rate variance = 3,150*$3.40 - $4,200

Variable overhead rate variance = $10,710 - 4,200 = $6,510 Favorable

Variable overhead efficiency variance = Standard hours*standard rate - Actual hours*standard rate

Variable overhead efficiency variance = (4,200*0.5)*$3.40 - 3,150*$3.40

Variable overhead efficiency variance = $7,140 - 10,710 = $3,570 Unfavorable