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, is prepared using an elaborate distilling process. The company has developed standard costs for one unit of Fludex, as follows: During November, the following activity was recorded related to the production of Fludex: a. Materiais purchased, 10,000 ounces at a cost of $197,000. b. There was no beginning inventory of materials; howevet, at the end of the month, 2,550 Sunces 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 170 hours ot an average pay rate of $11.50 per hour. d. Variable manufacturing overhead is assigned to Fludex on the basis of direct labor-hours. Variable manufacturing overhead costs during November totaled $4,800. e. During November, the company produced 3,700 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 purchose 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 24 technicians employed in the production of Fludex consisted of 6 senior technicians and 18 assistants. During Novembec, 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 ond efficiency variances. 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 lo recommend that 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 6 November, the company experimented with fewer senior technicians and more assis 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. For direct materials, compute the price and quantity variances. Note: Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, ar zero variance). Input all amounts as positive values. 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 cont recommend that 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 6 senior technicians and November, the company experimented with fewer senior technicians and more assistants in order to reduc 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. For direct labor, compute the rate and efficiency variances. Note: Indicate the effect of each variance by selecting "F" for favorable, "U" fol "unfavorable, and "None" for no effect zero variance), Input all amounts as positive values
