Becton Labs Inc. produces various chemical compounds for industrial use. One compound, called Fludex, is prepared by means of an elaborate distilling process. The company has developed standard costs for one unit of Fludex, as follows: Direct materials Direct labour Variable overhead 2.50 mL at 1.40 hours at 1.40 hours at $ $24 $17.00 $ 8.00 per millilitre per hour. per hour During November, the following activity was recorded by the company relative to production of Fludex: a. Materials were purchased, 12,360 millilitres at a cost of $265,122. b. There was no beginning inventory of materials on hand to start the month; at the end of the month, 2,500 millilitres of material remained in the warehouse unused. c. The company employs 35 lab technicians to work on the production of Fludex. During November, each worked an average of 160 hours at an average rate of $16 per hour. d. Variable manufacturing overhead is assigned to Fludex on the basis of direct labour-hours. Variable manufacturing overhead costs during November totalled $42,680. e. Fixed overhead is also allocated on the basis of direct labour-hours. The company had budgeted $14,000 for the month but underapplied it by $445. f. During November, 3,840 good units of Fludex were produced. The normal volume for the month is 4,000 good units. The company's management is anxious to determine the efficiency of the activities surrounding the production of Fludex. The company's policy is to investigate any variance more than 2% different from the relevant standard.

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Chapter1: Financial Statements And Business Decisions
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Becton Labs Inc. produces various chemical compounds for industrial use. One compound, called Fludex, is prepared by means of an
elaborate distilling process. The company has developed standard costs for one unit of Fludex, as follows:
Direct materials
Direct labour
Variable overhead
During November, the following activity was recorded by the company relative to production of Fludex:
a. Materials were purchased, 12,360 millilitres at a cost of $265,122.
b. There was no beginning inventory of materials on hand to start the month; at the end of the month, 2,500 millilitres of material
remained in the warehouse unused.
2.50 mL at
1.40 hours at
1.40 hours at
c. The company employs 35 lab technicians to work on the production of Fludex. During November, each worked an average of 160
hours at an average rate of $16 per hour.
d. Variable manufacturing overhead is assigned to Fludex on the basis of direct labour-hours. Variable manufacturing overhead costs
during November totalled $42,680.
e. Fixed overhead is also allocated on the basis of direct labour-hours. The company had budgeted $14,000 for the month but
underapplied it by $445.
f. During November, 3,840 good units of Fludex were produced. The normal volume for the month is 4,000 good units.
The company's management is anxious to determine the efficiency of the activities surrounding the production of Fludex. The
company's policy is to investigate any variance more than 2% different from the relevant standard.
Required:
1. For materials used in the production of Fludex:
Materials price variance
Materials quantity variance
$ $24
$ 17.00
$ 8.00
a. Compute the price and quantity variances. (Indicate the effect of each variance by selecting "F" for favourable, "U" for
unfavourable, and "None" for no effect (i.e., zero variance).)
O Yes
O No
per millilitre
per hour
per hour
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?
Labour rate variance
Labour efficiency variance
2. For direct labour employed in the production of Fludex:
a. Compute the rate and efficiency variances. (Indicate the effect of each variance by selecting "F" for favourable, "U" for
unfavourable, and "None" for no effect (i.e., zero variance).)
O Yes
O No
b. In the past, the 35 technicians employed in the production of Fludex consisted of 20 senior technicians and 15 assistants. During
November, the company experimented with only 15 senior technicians and 20 assistants in order to save costs. Would you recommend
that the new labour mix be continued?
Variable overhead spending variance
Variable overhead efficiency variance
3-a. Compute the variable overhead spending and efficiency variances. (Indicate the effect of each variance by selecting "F" for
favourable, "U" for unfavourable, and "None" for no effect (i.e., zero variance).)
Fixed overhead budget variance
Fixed overhead volume variance
3-b. This part of the question is not part of your Connect assignment.
4. Compute the fixed overhead cost variances for November. (Indicate the effect of each variance by selecting "F" for favourable,
"U" for unfavourable, and "None" for no effect (i.e., zero variance).)
Transcribed Image Text:Becton Labs Inc. produces various chemical compounds for industrial use. One compound, called Fludex, is prepared by means of an elaborate distilling process. The company has developed standard costs for one unit of Fludex, as follows: Direct materials Direct labour Variable overhead During November, the following activity was recorded by the company relative to production of Fludex: a. Materials were purchased, 12,360 millilitres at a cost of $265,122. b. There was no beginning inventory of materials on hand to start the month; at the end of the month, 2,500 millilitres of material remained in the warehouse unused. 2.50 mL at 1.40 hours at 1.40 hours at c. The company employs 35 lab technicians to work on the production of Fludex. During November, each worked an average of 160 hours at an average rate of $16 per hour. d. Variable manufacturing overhead is assigned to Fludex on the basis of direct labour-hours. Variable manufacturing overhead costs during November totalled $42,680. e. Fixed overhead is also allocated on the basis of direct labour-hours. The company had budgeted $14,000 for the month but underapplied it by $445. f. During November, 3,840 good units of Fludex were produced. The normal volume for the month is 4,000 good units. The company's management is anxious to determine the efficiency of the activities surrounding the production of Fludex. The company's policy is to investigate any variance more than 2% different from the relevant standard. Required: 1. For materials used in the production of Fludex: Materials price variance Materials quantity variance $ $24 $ 17.00 $ 8.00 a. Compute the price and quantity variances. (Indicate the effect of each variance by selecting "F" for favourable, "U" for unfavourable, and "None" for no effect (i.e., zero variance).) O Yes O No per millilitre per hour per hour 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? Labour rate variance Labour efficiency variance 2. For direct labour employed in the production of Fludex: a. Compute the rate and efficiency variances. (Indicate the effect of each variance by selecting "F" for favourable, "U" for unfavourable, and "None" for no effect (i.e., zero variance).) O Yes O No b. In the past, the 35 technicians employed in the production of Fludex consisted of 20 senior technicians and 15 assistants. During November, the company experimented with only 15 senior technicians and 20 assistants in order to save costs. Would you recommend that the new labour mix be continued? Variable overhead spending variance Variable overhead efficiency variance 3-a. Compute the variable overhead spending and efficiency variances. (Indicate the effect of each variance by selecting "F" for favourable, "U" for unfavourable, and "None" for no effect (i.e., zero variance).) Fixed overhead budget variance Fixed overhead volume variance 3-b. This part of the question is not part of your Connect assignment. 4. Compute the fixed overhead cost variances for November. (Indicate the effect of each variance by selecting "F" for favourable, "U" for unfavourable, and "None" for no effect (i.e., zero variance).)
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