Problem 10-14 (Algo) Basic Variance Analysis (L010-1, LO10-2, LO10-3) 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 Cost Direct materials 2.00 ounces $30.00 per ounce $60.00 Direct labor 0.50 hours $14.00 per hour 7.00 Variable manufacturing overhead 0.50 hours $ 3.48 per hour Total standard cost per unit $68.70 1.70 During November, the following activity was recorded related to the production of Fludex: a. Materials purchased, 10,000 ounces at a cost of $287,000. b. There was no beginning inventory of materials; however, at the end of the month, 3,000 ounces of material remained in ending c. The company employs 20 lab technicians to work on the production of Fludex. During November, they each worked an average of 130 hours at an average pay rate of $12.00 per hour. d. Variable manufacturing overhead is assigned to Fludex on the basis of direct labor-hours. Variable manufacturing overhead costs during November totaled $4,700. e. During November, the company produced 3,400 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 that the company sign the contract? 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? 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 4 senior technicians and 16 assistants. During November, the company experimented with fewer senior technicians and more assistants in order to reduce labor costs. Would you recommend that the new labor mix be continued? 3. Compute the variable overhead rate and efficiency variances. Complete this question by entering your answers in the tabs below. Req 1A Reg 1B Reg 2A Req 28 Req3 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 (.e., zero variance). Input all amounts as positive values.) Materials price variance Materials quantity variance 1 Reg 18> Complete this question by entering your answers in the tabs below. Reg 1A Reg 1B Req 2A Req 2B Reg 3 For direct materials, 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 ONO Reg 1A Reg 1B Req 2A Reg 28 Req3 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 (1.e., zero variance). Input all amounts as positive values.) Labor rate variance Labor efficiency variance Reg 1A Reg 18 Reg 2A Req 2B Reg 3 In the past, the 20 technicians employed in the production of Fludex consisted of 4 senior technicians and 16 assistants. During November, the company experimented with fewer senior technicians and more assistants in order to reduce labor costs. Would you recommend that the new labor mix be continued? 10Yes NO Req 1A Req 1B Req ZA Req 2B Reg 3 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 ().e., zero variance). Input all amounts as positive values.) Variable overhead rate variance Variable overhead efficiency variance
