Becton Labs, Inc., produces varlous 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 actlvity was recorded related to the production of Fludex: a. Materlals purchased, 12,000 ounces at a cost of $225,000. b. There was no beginning inventory of materlals; however, at the end of the month, 2,500 ounces of material remained in ending Inventory. c. The company employs 35 lab techniclans 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. Varlable manufacturing overhead is assigned to Fludex on the basis of direct labor-hours. Varlable manufacturing overhead costs during November totaled $18,200. e. During November, the company produced 3,750 unlts of Fludex. Required: 1. For direct materlals: a. Compute the prlce and quantlty varlances. b. The materlals 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 efficlency varlances. b. In the past, the 35 techniclans employed in the production of Fludex consisted of 20 senior techniclans and 15 assistants. During November, the company experimented with fewer senior techniclans and more assistants in order to reduce labor costs. Would you recommend that the new labor mlx be continued? 3. Compute the varlable overhead rate and efficlency varlances. Durling November, the following actlvity was recorded related to the production of Fludex: a. Materlals purchased, 12,000 ounces at a cost of $225,000. b. There was no beginning inventory of materlals; however, at the end of the month, 2,500 ounces of materlal remained in ending Inventory. c. The company employs 35 lab techniclans 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. Varlable manufacturing overhead is assigned to Fludex on the basis of direct labor-hours. Varlable manufacturing overhead costs during November totaled $18,200. e. Durling November, the company produced 3,750 units of Fludex. Required: 1. For direct materlals: a. Compute the price and quantity varlances. b. The materlals 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 efficlency varlances. b. In the past, the 35 techniclans employed In the production of Fludex consisted of 20 senior techniclans and 15 assistants. During November, the company experimented with fewer senior techniclans 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 efficlency 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 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. 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.)
