Question
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 or Rate Standard Cost Direct materials 2.5 ounces $ 20.00 per ounce $ 50.00 Direct labor 1.4 hours $ 12.50 per hour 17.50 Variable manufacturing overhead 1.4 hours $ 3.50 per hour 4.90 $ 72.40 ________________________________________ During November, the following activity was recorded relative to production of Fludex: 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 worked an average of 160 hours at an average rate of $12 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, 3,750 good units of Fludex were produced . Required: 1. For direct materials: a. Compute the price and quantity variances. (Input all amounts as positive values. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e, zero variance).) Materials price variance $15,000 F Materials quantity variance U 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? Yes No 2. For direct labor: a. Compute the rate and efficiency variances. Labor rate variance Labor efficiency variance
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started