3 (19 points) VAP Inc. manufactures water purification powder tablets that it sells to military organizations around the world. Quality of the ingredients used to produce the tablets is of great strategic importance. The company uses absorption costing in conjunction with a standard costing system and has established the following standards for one water purification tablet: Standard Quantity or Time Standard Price or Rate Direct Materials 30 grams $9/kg Direct Labour 0.10 hours $15/hour Variable manufacturing 0.10 hours $18/hour overhead Fixed manufacturing 0.10 hours $10/hour overhead During November, the company recorded the following activity relative to production of 1000 DiTell LdUUUI Variable manufacturing 0.10 hours $18/hour overhead Fixed manufacturing 0.10 hours $10/hour overhead During November, the company recorded the following activity relative to production of 40,000 tablets: A total of 1,800 kilograms of material was purchased at a cost of $15,840. There was no beginning inventory of materials; however, at the end of the month, 300 kilograms of material remained in ending inventory. The company employs 30 direct labourers to work on the production of the tablets. During November, each employee worked 130 hours at a rate of $14.50 per hour. Variable manufacturing overhead is assigned to the tablets on the basis of direct labour-hours. Variable manufacturing overhead costs during November totalled $71,500. Fixed manufacturing overhead is assigned to the tablets on the basis of direct labour hours. Fixed manufacturing overhead rate of $10 per direct labour hour was based on $42,000 fixed overhead costs and 4,200 direct labour hours (ie 42,000 tablets). Actual fixed manufacturing overhead was $45,000. The company's management is anxious to determine the efficiency of the tablet production activities. production activities. Required: (round to the nearest whole number) a) Compute the price and quantity variances for direct materials used in the production of the tablets. (5 marks) 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? Explain. (2 marks) c) Compute the rate and efficiency variances for direct labour in the production of the tablets. (3 marks) d) In the past, the 5 people employed in the production of tablets consisted of 3 senior workers and 2 assistants. During November, the company experimented with 4 senior workers and 1 assistant. Would you recommend that the new labour mix be continued? Explain. (2 marks) e) f) Compute the variable overhead spending and efficiency variances. (4 marks) Compute the fixed overhead spending (budget) variance and FOH volume Activ Go to 5 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? Explain. (2 marks) c) Compute the rate and efficiency variances for direct labour in the production of the tablets. (3 marks) d) In the past, the 5 people employed in the production of tablets consisted of 3 senior workers and 2 assistants. During November, the company experimented with 4 senior workers and 1 assistant. Would you recommend that the new labour mix be continued? Explain. (2 marks) e) Compute the variable overhead spending and efficiency variances. (4 marks) Compute the fixed overhead spending (budget) variance and FOH volume variance