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: Standard Quantity Standard Price Standard or Hours or Rate Cost Direct materials 2.5 ounces $20.00 per ounce $50.00 Direct labor 1.4 hours $22.50 per hour 31.50 Variable manufacturing overhead 1.4 hours $ 3.50 per hour 4.90 Total standard cost per unit $86.40 During November, the following activity was recorded related to the production of Fiudex: a. Materials purchased, 12,000 ounces at a cost of $225,000 b. There was no beginning inventory of materials; however, at the end of the month, 2,500 ounces of material remained in ending Inventory c. The company employs 35 lab technicians to work on the production of Fludex. During November, they each worked an average of 160 hours at an average pay rate of $22 per hour. d. Variable manufacturing overhead is assigned to Fludex on the basis of direct labor hours. Variable manufacturing overhead costs during November totaled $18,200. e. During November, the company produced 3,750 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 35 technicians employed in the production of Fludex consisted of 20 senior technicians and 15 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. Req1A Regis Reg 2 Reg 28 Req3 For direct materials, compute the price and quantity variances. (Indicate the effect of each variance by selecting for favorable, "U* for unfavorable, and "None" for no effect (le, zero variance) Input all amounts as positive values.) nces Materials price variance Material quantity variance 1 Regie > Req IA Req1B Req 2A Req 2B Req3 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 (.e., zero variance). Input all amounts as positive values.) Labor rate variance Labor efficiency variance Reg 1A Req1B Reg 2A Reg 2B Req3 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 (1.e., zero variance). Input all amounts as positive values.) Variable overhead rate variance Variable overhead efficiency variance
