Problem 11-14 Basic Variance Analysis [LO11-1, LO11-2, LO11-3] 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: Direct materials Direct labor Variable manufacturing overhead Standard Quantity 2.10 ounces 0.80 hours 0.80 hours Standard Price or Rate $22.00 per ounce $15.00 per hour $ 2.50 per hour Standard Cost $46.20 12.00 2.00 $60.20 During November, the following activity was recorded relative to production of Fludex: a. Materials purchased, 10,500 ounces at a cost of $216,825. b. There was no beginning inventory of materials; however, at the end of the month, 2,600 ounces of material remained in ending inventory. C. The company employs 20 lab technicians to work on the production of Fludex. During November, they worked an average of 180 hours at an average rate of $14.00 per hour. d. Variable manufacturing overhead is assigned to Fludex on the basis of direct labor-hours. Variable manufacturing overhead costs during November totaled $7,000. e. During November, 3,700 good units of Fludex were produced Required: 1. For direct materials: a. Compute the price and quantity variances. (Input all amounts as positive values. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e, zero variance).) Materials price variance Materials quantity variance LU 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? O Yes O No 2. For direct labor: a. Compute the rate and efficiency variances. (Input all amounts as positive values. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (ie, zero variance).) Labor rate variance Labor efficiency variance b. In the past, the 20 technicians employed in the production of Fludex consisted of 8 senior technicians and 12 assistants. During November, the company experimented with fewer senior technicians and more assistants in order to save costs. Would you recommend that the new labor mix be continued? O Yes O No 3. Compute the variable overhead rate and efficiency variances. (Input all amounts as positive values. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e, zero variance).) Variable overhead rate variance Variable overhead efficiency variance