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:
|
Standard |
Standard Price or |
Standard |
|
|
Direct materials |
1.3 ounces |
$5.70 per ounce |
$7.41 |
|
Direct labor |
.7 hours |
$12.30 per hour |
8.61 |
|
Variable manufacturing overhead |
.70 hours |
$2.70 per hour |
1.89 |
|
$17.91 |
|||
|
|
|||
During November, the following activity was
recorded relative to production of Fludex:
a. Materials purchased, 10,500 ounces at a cost
of $56,700.
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 40
lab technicians to work on the production of Fludex. During November, they
worked an average of 60.00 hours at an average rate of $13.00 per hour.
d. Variable manufacturing
overhead is assigned to Fludex on the basis of direct labor-hours. Variable
manufacturing overhead costs during November totaled $5,520.
e. During November, 4,000 good units of Fludex
were produced.
The company’s management is anxious to
determine the efficiency of the Fludex production activities.
Requirement 1:
For direct materials used in the production of
Fludex:
(a)
Compute the price and
quantity variances. (Indicate the effect of
each variance by selecting “F” for favorable, “U” for
unfavorable, and “None” for no effect (i.e., zero variance). Input
all amounts as positive values. Omit the “$” sign in your
response.)
Materials price variance (Click to select)UFNone
Materials quantity variance (Click to select)UNoneF
(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?
(Click to select)NoYes
Requirement 2:
For direct labor employed in the production of
Fludex:
(a)
Compute the 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. Round your answers to the nearest dollar
amount. Omit the “$” sign in your response.)
Labor rate variance (Click to select)FNoneU
Labor efficiency variance (Click to select)UNoneF
(b)
In the past, the 40
technicians employed in the production of Fludex consisted of 20 senior
technicians and 15 assistants. During November, the company experimented with
fewer senior technicians and more assistants in order to save costs. Would
you recommend that the new labor mix be continued?
(Click to select)NoYes
Requirement 3:
(a)
Compute the variable
overhead rate and efficiency variances. (Indicate the effect of each variance by selecting “F”
for favorable, “U” for unfavorable, and “None” for no
effect (i.e., zero variance). Input all amounts as positive values. Round
your answers to the nearest dollar amount. Omit the “$” sign in
your response.)
Variable overhead rate variance
$
(Click to select)NoneFU
Variable overhead efficiency variance
$
(Click to select)UFNone
(b)
What relation can you see between this
efficiency variance and the labor efficiency variance?
(Click to select)Independent.Directly related.