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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
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 15.00 per ounce 15.00 per hou $ 3.50 per hour Cost Direct materials Direct labor Variable manufacturing overhead Total standard cost per unit 2.10 ounces 0.80 hours 0.80 hours $31.50 12.00 2.80 $46.30 During November, the following activity was recorded related to the production of Fludex a. Materials purchased, 10,500 ounces at a cost of $143,325 b. There was no beginning inventory of materials; however, at the end of the month, 3,050 ounces of material c. The company employs 21 lab technicians to work on the production of Fludex. During November, they each d. Variable manufacturing overhead is assigned to Fludex on the basis of direct labor-hours. Variable manufacturing e. During November, the company produced 3,500 units of Fludex. remained in ending inventory worked an average of 160 hours at an average pay rate of $13.50 per hour overhead costs during November totaled $6,800 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
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