Problem 10-14 (Algo) Basic Variance Analysis [LO10-1, LO10-2, LO10-3] 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 Standard Price or Rate 2.40 ounces 0.80 hours 0.80 hours $ 21.00 per ounce $ 15.00 per hour $ 3.50 per hour Standard Cost $ 50.40 12.00 2.80 $ 65.20 During November, the following activity was recorded related to the production of Fludex: a. Materials purchased, 13,500 ounces at a cost of $266,625. b. There was no beginning inventory of materials; however, at the end of the month, 4,200 ounces of material remained in ending inventory. c. The company employs 24 lab technicians to work on the production of Fludex. During November, they each worked an average of 140 hours at an average pay rate of $14.50 per hour. d. Variable manufacturing overhead is assigned to Fludex on the basis of direct labor-hours. Variable manufacturing overhead costs during November totaled $6,800. e. During November, the company produced 3,800 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 24 technicians employed in the production of Fludex consisted of 4 senior technicians and 20 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. Required 1A Required 1B Required 2A Required 2B Required 3 For direct materials, compute the price and quantity variances. Note: 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. Materials price variance Materials quantity variance < Required 1A Required 1B > Required 1A Required 1B Required 2A Required 2B Required 3 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? Required 1A Required 1B Required 2A Required 2B Required 3 For direct labor, compute the rate and efficiency variances. Note: 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. Labor rate variance Labor efficiency variance Required 1A Required 1B Required 2A Required 2B Required 3 In the past, the 24 technicians employed in the production of Fludex consisted of 4 senior technicians and 20 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? Required 1A Required 1B Required 2A Required 2B Required 3 Compute the variable overhead rate and efficiency variances. Note: 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. Variable overhead rate variance Variable overhead efficiency variance < Required 2B Required 3 >