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:

Bowen Company manufactures one product, it does not maintain any beginning or ending inventories, and its uses a standard cost system. Its predetermined overhead rate includes $1,000,000 of fixed overhead in the numerator and 50,000 direct labor-hours in the denominator. The company purchased (with cash) and used 35,000 yards of raw materials at a cost of $10.00 per yard. Its direct laborers worked 20,100 hours and were paid a total of $290,200. The company started and completed 8,300 units of finished goods during the period. Bowens standard cost card for its only product is as follows:

Inputs	(1) Standard Quantity or Hours		(2) Standard Price or Rate			Standard Cost (1) (2)
Direct materials	3.2	yards	$	11.00	per yard	$	35.20
Direct labor	2.6	hours	$	14.00	per hour		36.40
Fixed manufacturing overhead	2.6	hours	$	20.00	per hour		52.00
Total standard cost per unit						$	123.60

Required:

1. When recording the raw material purchases:

a. The Raw Materials inventory will increase (decrease) by how much?

b. The Cash will increase (decrease) by how much?

2. When recording the raw materials used in production:

a. The Raw Materials inventory will increase (decrease) by how much?

b. The Work in Process inventory will increase (decrease) by how much?

3. When recording the direct labor costs added to production:

a. The Work in Process inventory will increase (decrease) by how much?

b. The Cash will increase (decrease) by how much?

4. When applying fixed manufacturing overhead to production, the Work in Process inventory will increase (decrease) by how much?

5. When transferring manufacturing costs from Work in Process to Finished Goods, the Finished Goods inventory will increase (decrease) by how much?

During November, the following activity was recorded related to the production of Fludex:

1. Materials purchased, 10,000 ounces at a cost of $197,000.

2. There was no beginning inventory of materials; however, at the end of the month, 2,550 ounces of material remained in ending inventory.

3. The company employs 24 lab technicians to work on the production of Fludex. During November, they each worked an average of 170 hours at an average pay rate of $11.50 per hour.

4. Variable manufacturing overhead is assigned to Fludex on the basis of direct labor-hours. Variable manufacturing overhead costs during November totaled $4,800.

5. During November, the company produced 3,700 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 24 technicians employed in the production of Fludex consisted of 6 senior technicians and 18 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.

1a. The raw materials will 1b. The cash will 2a. The raw materials will 2b. The work in process will 3a. The work in process will The cash will 4. The work in process will 5 The finished goods will