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Problem 10-14 (Algo) Basic Variance Analysis [LO10-1, LO10-2, LO10-3] Becton Labs, Incorporated, 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: During November, the following activity was recorded related to the production of Fludex: a. Materlals purchased, 11,500 ounces at a cost of $259,325. b. There was no beginning inventory of materlals; however, at the end of the month, 2,700 ounces of material remained in ending inventory. c. The company employs 23 lab techniclans to work on the production of Fludex. During November, they each worked an average of 100 hours at an average pay rate of $11.00 per hour. d. Varlable manufacturing overhead is assigned to Fludex on the basis of direct labor-hours. Varlable manufacturing overhead costs during November totaled $2,300. e. During November, the company produced 4,100 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 anxlous 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 efficlency variances. b. In the past, the 23 technicians employed in the production of Fludex consisted of 4 senior techniclans and 19 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 varlable overhead rate and efficiency varlances. Complete this question by entering your answers in the tabs below. 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.) Complete this question by entering your answers in the tabs below. For direct materials, 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? Complete this question by entering your answers in the tabs below. 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.) Complete this question by entering your answers in the tabs below. In the past, the 23 technicians employed in the production of Fludex consisted of 4 senior technicians and 19 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? Complete this question by entering your answers in the tabs below. 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.)
