1 answer

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

Question:

Becton Labs, Inc., produces various chemical compounds for industrial use. One compound, called Fludex, is prepared using anRequired: 1. For direct materials: a. Compute the price and quantity variances. b. The materials were purchased from a new suComplete this question by entering your answers in the tabs below. Req 1A Req 1B Req 2A Req 2B Reg 3 For direct labor, computComplete this question by entering your answers in the tabs below. Req 1A Reg 1B Req 2A Req 2B Reg 3 Compute the variable ove

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: Direct materials Direct labor Variable manufacturing overhead Total standard cost per unit Standard Quantity or Hours 2.50 ounces 0.70 hours 0.70 hours Standard Price or Rate $19.00 per ounce $15.00 per hour $ 4.00 per hour Standard Cost $47.50 10.50 2.80 $60.80 During November, the following activity was recorded related to the production of Fludex: a. Materials purchased, 12,500 ounces at a cost of $223,125. b. There was no beginning inventory of materials; however, at the end of the month, 3,250 ounces of material remained in ending inventory. c. The company employs 21 lab technicians to work on the production of Fludex. During November, they each worked an average of 150 hours at an average pay rate of $12.50 per hour. d. Variable manufacturing overhead is assigned to Fludex on the basis of direct labor-hours. Variable manufacturing overhead costs during November totaled $5,100. e. During November, the company produced 3,500 units of Fludex.
Required: 1. For direct materials: a. Compute the price and quantity variances. 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? 2. For direct labor: a. Compute the rate and efficiency variances. b. In the past, the 21 technicians employed in the production of Fludex consisted of 4 senior technicians and 17 assistants. During November, the company experimented with fewer senior technicians and more assistants in order to reduce labor costs. Would you recommend that the new labor mix be continued? 3. Compute the variable overhead rate and efficiency variances. Complete this question by entering your answers in the tabs below. Req 1A Req 1B Req 2A Req 2B Reg 3 For direct materials, compute the price and quantity variances. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.) Materials price variance Materials quantity variance ( Req1A Req 1B >
Complete this question by entering your answers in the tabs below. Req 1A Req 1B Req 2A Req 2B Reg 3 For direct labor, compute the rate and efficiency variances. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.) Labor rate variance Labor efficiency variance < Reg 1B Req 2B >
Complete this question by entering your answers in the tabs below. Req 1A Reg 1B Req 2A Req 2B Reg 3 Compute the variable overhead rate and efficiency variances. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.) Variable overhead rate variance Variable overhead efficiency variance < Req 2B Req3 )

Answers

(1)

(A)

Material price variance = actual quantity purchased x (standard price - actual price)

= 12500 x ($19 - $17.85)

= $14375 Favorable

Where,

Actual price = material cost paid/units of material purchased

= $223125/12500 = $17.85

(B)

Material quantity variance = standard price x (standard quantity - actual quantity used)

= $19 x {8750 - (12500 - 3250)}

= $9500 Unfavorable

Where,

Standard quantity = actual output x standard quantity per unit of output

= 3500 x 2.50 = 8750 ounces

(2)

(A)

Labor rate variance = actual hours x (standard rate - actual rate)

= (21 x 150) x ($15 - $12.50)

= $7875 Favorable

(B)

Labor efficiency variance = standard rate x (standard hours - actual hours)

= $15 x (2450 - 3150)

= $10500 Unfavorable

Where,

Standard hours = actual output x standard hours per unit of output

= 3500 x 0.70 = 2450 hours

(3)

(A)

Variable overhead rate variance = actual hours x (standard rate - actual rate)

= (21 x 150) x ($4 - $1.62)

= $7497 Favorable

Where,

Actual rate = actual variable overhead/actual hours

= $5100/3150 = $1.62

(B)

Variable overhead efficiency variance = standard rate x (standard hours - actual hours)

= $4 x (2450 - 3150)

= $2800 Unfavorable

Where,

Standard hours = actual output x standard hours per unit of output

= 3500 x 0.70 = 2450 hours

.

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