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: Direct materials Direct labor Variable manufacturing overhead Total standard cost per unit Standard Quantity or Standard Price or Hours 2.20 ounces 0.70 hours 0.70 hours Rate $23.00 per ounce $ 12.00 per hour $ 3.00 per hour Standard Cost $ 50.60 8.40 2.10 $ 61.10 During November, the following activity was recorded related to the production of Fludex: a. Materials purchased, 11,000 ounces at a cost of $237,600. b. There was no beginning inventory of materials; however, at the end of the month, 2,650 ounces of material remained in ending inventory. c. The company employs 18 lab technicians to work on the production of Fludex. During November, they each worked an average of 190 hours at an average pay rate of $10.50 per hour. d. Variable manufacturing overhead is assigned to Fludex on the basis of direct labor-hours. Variable manufacturing overhead costs during November totaled $6,200. e. During November, the company produced 3,750 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 that the company sign the contract? 2. For direct labor: a. Compute the rate and efficiency variances. b. In the past, the 18 technicians employed in the production of Fludex consisted of 5 senior technicians and 13 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? 3. Compute the variable overhead rate and efficiency variances.

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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:
Standard Quantity or Standard Price or
Hours
Rate
Direct materials
Direct labor
2.20 ounces
0.70 hours
$ 23.00 per ounce
$ 12.00 per hour
Standard
Cost
$ 50.60
8.40
Variable manufacturing overhead
Total standard cost per unit
0.70 hours
$ 3.00 per hour
2.10
$ 61.10
During November, the following activity was recorded related to the production of Fludex:
a. Materials purchased, 11,000 ounces at a cost of $237,600.
b. There was no beginning inventory of materials; however, at the end of the month, 2,650 ounces of material remained in ending
inventory.
c. The company employs 18 lab technicians to work on the production of Fludex. During November, they each worked an average of
190 hours at an average pay rate of $10.50 per hour.
d. Variable manufacturing overhead is assigned to Fludex on the basis of direct labor-hours. Variable manufacturing overhead costs
during November totaled $6,200.
e. During November, the company produced 3,750 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 that the company sign the contract?
2. For direct labor:
a. Compute the rate and efficiency variances.
b. In the past, the 18 technicians employed in the production of Fludex consisted of 5 senior technicians and 13 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?
3. Compute the variable overhead rate and efficiency variances.
Complete this question by entering your answers in the tabs below.
Req 1A
Req 1B
Req 2A
Req 2B
Req 3
Compute the variable overhead rate and efficiency variances. (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
F
2,385 U
< Req 2B
Req 3 >
Transcribed Image Text: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: Standard Quantity or Standard Price or Hours Rate Direct materials Direct labor 2.20 ounces 0.70 hours $ 23.00 per ounce $ 12.00 per hour Standard Cost $ 50.60 8.40 Variable manufacturing overhead Total standard cost per unit 0.70 hours $ 3.00 per hour 2.10 $ 61.10 During November, the following activity was recorded related to the production of Fludex: a. Materials purchased, 11,000 ounces at a cost of $237,600. b. There was no beginning inventory of materials; however, at the end of the month, 2,650 ounces of material remained in ending inventory. c. The company employs 18 lab technicians to work on the production of Fludex. During November, they each worked an average of 190 hours at an average pay rate of $10.50 per hour. d. Variable manufacturing overhead is assigned to Fludex on the basis of direct labor-hours. Variable manufacturing overhead costs during November totaled $6,200. e. During November, the company produced 3,750 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 that the company sign the contract? 2. For direct labor: a. Compute the rate and efficiency variances. b. In the past, the 18 technicians employed in the production of Fludex consisted of 5 senior technicians and 13 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? 3. Compute the variable overhead rate and efficiency variances. Complete this question by entering your answers in the tabs below. Req 1A Req 1B Req 2A Req 2B Req 3 Compute the variable overhead rate and efficiency variances. (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 F 2,385 U < Req 2B Req 3 >
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