Becton Labs, Incorporated, produces various chemical compounds for industrial use. One compound, called Fludex, has the following standard cost per unit Direct materials Direct labor Variable manufacturing overhead Total standard cost per unit Standard Quantity or Hours 2.40 ounces 0.60 hours 0.60 hours Standard Price or Rate $ 27.00 per ounce $12.00 per hour $ 3.50 per hour Standard Cost $64.80 7.20 2.10 $74.10 During November, the following activity was recorded related to the production of Fludex: a. Materials purchased, 13,000 ounces at a cost of $330,200. b. There was no beginning inventory of materials, however, at the end of the month, 2,850 ounces of material remained in ending inventory. c. The company employs 20 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 $11.00 per hour. d. Variable manufacturing overhead is assigned to Fludex on the basis of direct labor-hours. Variable manufacturing overhead costs during November totaled $6,000. e. During November, the company produced 4,200 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 the company sign the contract? 2. For direct labor: a. Compute the rate and efficiency variances. b. In the past, the 20 technicians employed in the production of Fludex consisted of 7 senior technicians and 13 assistants. During November, the company experimented with fewer senior technicians and more assistants in order to reduce labor costs. Would

you recommend the new labor mix be continued? 3. Compute the variable overhead rate and efficiency variances.

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Becton Labs, Incorporated, produces various chemical compounds for industrial use. One compound, called Fludex, has the following standard cost per unit: During November, the following activity was recorded related to the production of Fludex: a. Materials purchased, 13,000 ounces at a cost of $330,200. b. There was no beginning inventory of materials; however, at the end of the month, 2,850 ounces of material remained in ending inventory. c. The company employs 20 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 $11.00 per hour. d. Variable manufacturing overhead is assigned to Fludex on the basis of direct labor-hours. Variable manufacturing overhead costs during November totaled $6,000. e. During November, the company produced 4,200 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 the company sign the contract? 2. For direct labor: a. Compute the rate and efficiency variances. b. In the past, the 20 technicians employed in the production of Fludex consisted of 7 senior technicians and 13 assistants. During November, the company experimented with fewer senior technicians and more assistants in order to reduce labor costs. Would you recommend the new labor mix be continued? 3. Compute the variable overhead rate and efficiency variances. John Fleming, chief administrator for Valley View Hospital, is concerned about the costs for tests in the hospital's lab. Charges for lab tests are consistently higher at Valley View than other hospitals and have resulted in many complaints. Also, because of strict regulations on amounts reimbursed for lab tests, payments received from insurance companies and governmental units have not been high enough to cover lab costs. Mr. Fleming asked you to evaluate costs in the hospital's lab for the past month. The following information is available: a. Two types of tests are performed in the lab-blood tests and smears. During the past month, 200 blood tests and 2,000 smears were performed in the lab. b. Small glass plates are used in both types of tests. During the past month, the hospital purchased 10,000 plates at a cost of $32,900. 1,000 of these plates were unused at the end of the month; no plates were on hand at the beginning of the month. c. During the past month, 1,000 hours of labor time were recorded in the lab at a cost of $10,300. d. The lab's variable overhead cost last month totaled $6,600. Valley View Hospital has never used standard costs. By searching industry literature, however, you determined the following nationwide averages for hospital labs: Plates: Three plates are required per lab test. These plates cost $3.50 each and are disposed of after the test is completed. Labor: Each blood test should require 0.6 hour to complete, and each smear should require 0.30 hour to complete. The average cost of this lab time is $11.00 per hour. Overhead: Overhead cost is based on direct labor-hours. The average rate for variable overhead is $6.10 per hour. Required: 1. Compute a materials price variance for the plates purchased last month and a materials quantity variance for the plates used last month. 2. For labor cost in the lab: a. Compute a labor rate variance and a labor efficiency variance. b. In most hospitals, one-half of the workers in the lab are senior technicians and one-half are assistants. In an effort to reduce costs, Valley View Hospital employs only one-fourth senior technicians and three-fourths assistants. Would you recommend this policy be continued? 3-a. Compute the variable overhead rate and efficiency variances. 3-b. Is there any relation between the variable overhead efficiency variance and the labor efficiency variance