PROBLEM $10-14$ Basic Variance Analysis LO$10-1,[$O$10-2,[$O$10-3$

Becton Labs, Inc., 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, $12,000$ 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:

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? Explain.

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 the new labor mix be continued? Explain.

Compute the variable overhead rate and efficiency variances. What relation do you see between this efficiency variance and the labor

efficiency variance?