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 Quantity or Hours standard Price Standard or Rate $18.00 per ounce $14.00 per hour Cost Direct materials 2.40 ounces $ 43.20 Direct labor 0.70 hours 9.80 variable manufacturing overhead 0.70 hours $ 3.00 per hour 2.10 Total standard cost per unit $ 55.10 During November, the following activity was recorded related to the production of Fludex: a. Materials purchased, 12,000 ounces at a cost of $198,000. b. There was no beginning inventory of materials; however, at the end of the month, 3,200 ounces of materilal remalned In ending Inventory. c. The company employs 20 lab technicians to work on the production of Fludex. During November, they each worked an average of 160 hours at an average pay rate of $12.00 per hour. d. Varlable manufacturing overhead is assigned to Fludex on the basis of direct labor-hours. Varlable manufacturing overhead costs during November totaled $4,800. e. During November, the company produced 3,600 units of Fludex. Requlred: 1. For direct materlals: a. Compute the price and quantity varlances. b. The materials were purchased from a new supplier who Is anxlous 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 varlances. b. In the past, the 20 techniclans employed In the production of Fludex consisted of 5 senlor techniclans 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? 3. Compute the varlable overhead rate and efficiency varlances.
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 Quantity or Hours standard Price Standard or Rate $18.00 per ounce $14.00 per hour Cost Direct materials 2.40 ounces $ 43.20 Direct labor 0.70 hours 9.80 variable manufacturing overhead 0.70 hours $ 3.00 per hour 2.10 Total standard cost per unit $ 55.10 During November, the following activity was recorded related to the production of Fludex: a. Materials purchased, 12,000 ounces at a cost of $198,000. b. There was no beginning inventory of materials; however, at the end of the month, 3,200 ounces of materilal remalned In ending Inventory. c. The company employs 20 lab technicians to work on the production of Fludex. During November, they each worked an average of 160 hours at an average pay rate of $12.00 per hour. d. Varlable manufacturing overhead is assigned to Fludex on the basis of direct labor-hours. Varlable manufacturing overhead costs during November totaled $4,800. e. During November, the company produced 3,600 units of Fludex. Requlred: 1. For direct materlals: a. Compute the price and quantity varlances. b. The materials were purchased from a new supplier who Is anxlous 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 varlances. b. In the past, the 20 techniclans employed In the production of Fludex consisted of 5 senlor techniclans 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? 3. Compute the varlable overhead rate and efficiency varlances.
Chapter1: Financial Statements And Business Decisions
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Transcribed Image Text: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 Quantity
or Hours
standard Price
Standard
or Rate
$18.00 per ounce
$14.00 per hour
Cost
Direct materials
2.40 ounces
$ 43.20
Direct labor
0.70 hours
9.80
variable manufacturing overhead
0.70 hours
$ 3.00 per hour
2.10
Total standard cost per unit
$ 55.10
During November, the following activity was recorded related to the production of Fludex:
a. Materials purchased, 12,000 ounces at a cost of $198,000.
b. There was no beginning inventory of materials; however, at the end of the month, 3,200 ounces of materilal remalned In ending
Inventory.
c. The company employs 20 lab technicians to work on the production of Fludex. During November, they each worked an average of
160 hours at an average pay rate of $12.00 per hour.
d. Varlable manufacturing overhead is assigned to Fludex on the basis of direct labor-hours. Varlable manufacturing overhead costs
during November totaled $4,800.
e. During November, the company produced 3,600 units of Fludex.
Requlred:
1. For direct materlals:
a. Compute the price and quantity varlances.
b. The materials were purchased from a new supplier who Is anxlous 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 varlances.
b. In the past, the 20 techniclans employed In the production of Fludex consisted of 5 senlor techniclans 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?
3. Compute the varlable overhead rate and efficiency varlances.
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