PROBLEM 10-14 Basic Variance Analysis (L010-1,L010-2, L010-3 Becton Labs, Inc., produces various chemical compounds for andustrial use. One compound, called Fiudex, is prepared using an elaborate distilling process. The company has developed standard costs for one unit of Fiudex, as follow Page 459 Standard Quantity Standard Price Standard or Hours or Rate Cost Direct materials 25 ounces $20.00 per ounce $50.00 Direct labor 1.4 hours $22.50 per hour 31.50 Variable manufacturing overhead 1.4 hours $3.50 per hour 4.90 Total standard cost per unit $36.40 Daring November the following activity was recorded related to the production of Fludex 2. 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 puy rate of $22 per hour. d. Variable manufacturing overhead is assigned to Fludex on the basis of direct laborhours. Variable manufacturing overhead costs during November totaled $15,200 . During November the company produced 3,750 units of Fludes Required: 1. For direct materials 2. 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? Explain 2. For direct labor Compute the rate and efficiency variances. b. In the past, the 35 technicians employed in the production of Fiudex 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 that the new labor mix be continued? Explain 3. Compute the variable overhead rate and efficiency variances. What relation can you see between this efficiency variance and the labor efficiency variance