Becton Labs, Inc., produces various chemical compounds forindustrial use. One compound, called Fludex, is...

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Becton Labs, Inc., produces various chemical compounds forindustrial use. One compound, called Fludex, is prepared using anelaborate distilling process. The company has developed standardcosts for one unit of Fludex, as follows: Standard Quantity orHours Standard Price or Rate Standard Cost Direct materials 2.40ounces $ 21.00 per ounce $ 50.40 Direct labor 0.80 hours $ 15.00per hour 12.00 Variable manufacturing overhead 0.80 hours $ 3.50per hour 2.80 Total standard cost per unit $ 65.20 During November,the following activity was recorded related to the production ofFludex: a.Materials purchased, 13,500 ounces at a cost of $266,625.b.There was no beginning inventory of materials; however, at theend of the month, 4,200 ounces of material remained in endinginventory. c.The company employs 24 lab technicians to work on theproduction of Fludex. During November, they each worked an averageof 140 hours at an average pay rate of $14.50 per hour. d.Variablemanufacturing overhead is assigned to Fludex on the basis of directlabor-hours. Variable manufacturing overhead costs during Novembertotaled $6,800. e.During November, the company produced 3,800 unitsof Fludex. Required: 1. For direct materials: a. Compute the priceand quantity variances. b. The materials were purchased from a newsupplier who is anxious to enter into a long-term purchasecontract. 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 ofFludex consisted of 4 senior technicians and 20 assistants. DuringNovember, the company experimented with fewer senior techniciansand more assistants in order to reduce labor costs. Would yourecommend that the new labor mix be continued? 3. Compute thevariable overhead rate and efficiency variances.

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4.1 Ratings (763 Votes)

1)	for direct materials

	a.	price and quantity variance

			Standard	-	Actual	*	Actual	=	Variance
			price		price		quantiy
materials price variance			21		19.75		13,500	=	16875	F
			standard	-	Actual	*	Standard	=	Variance
			qty		qty		price
materials quantity variance			9120		9,300		21		3780	U

	b.	yes

2)	for direct labor

			Standard	-	Actual	*	Actual	=	Variance
			rate		rate		hours
labor price variance			15		14.5		3360	=	1680	F
			standard	-	Actual	*	Standard	=	Variance
			hours		hours		rate
labor efficiency variance			3040		3,360		15		4800	U

	b.	no


3)	for variable overhead

			Standard	-	Actual	*	Actual	=	Variance
			rate		rate		hours
Variable overhead rate			3.5		2.02		3,360	=	4960	F
			standard	-	Actual	*	Standard	=	Variance
			hours		hours		rate
variable overhead efficiency			3040		3,360		3.5		1120	U

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In: AccountingBecton Labs, Inc., produces various chemical compounds forindustrial use. One compound, called Fludex, is prepared...Becton Labs, Inc., produces various chemical compounds forindustrial use. One compound, called Fludex, is prepared using anelaborate distilling process. The company has developed standardcosts for one unit of Fludex, as follows: Standard Quantity orHours Standard Price or Rate Standard Cost Direct materials 2.40ounces $ 21.00 per ounce $ 50.40 Direct labor 0.80 hours $ 15.00per hour 12.00 Variable manufacturing overhead 0.80 hours $ 3.50per hour 2.80 Total standard cost per unit $ 65.20 During November,the following activity was recorded related to the production ofFludex: a.Materials purchased, 13,500 ounces at a cost of $266,625.b.There was no beginning inventory of materials; however, at theend of the month, 4,200 ounces of material remained in endinginventory. c.The company employs 24 lab technicians to work on theproduction of Fludex. During November, they each worked an averageof 140 hours at an average pay rate of $14.50 per hour. d.Variablemanufacturing overhead is assigned to Fludex on the basis of directlabor-hours. Variable manufacturing overhead costs during Novembertotaled $6,800. e.During November, the company produced 3,800 unitsof Fludex. Required: 1. For direct materials: a. Compute the priceand quantity variances. b. The materials were purchased from a newsupplier who is anxious to enter into a long-term purchasecontract. 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 ofFludex consisted of 4 senior technicians and 20 assistants. DuringNovember, the company experimented with fewer senior techniciansand more assistants in order to reduce labor costs. Would yourecommend that the new labor mix be continued? 3. Compute thevariable overhead rate and efficiency variances.