Becton Labs, Incorporated, produces various chemical compounds for industrial use. One compound, called Fludex, has the following standard cost per unit: Standard Quantity or HoursStandard Price or RateStandard CostDirect materials2.40ounces$ 18.00per ounce$ 43.20Direct labor0.70hours$ 14.00per hour9.80Variable manufacturing overhead0.70hours$ 3.00per hour2.10Total standard cost per unit$ 55.10During November, the following activity was recorded related to the production of Fludex:Materials purchased, 12,000 ounces at a cost of $198,000.There was no beginning inventory of materials; however, at the end of the month, 3,200 ounces of material remained in ending inventory.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.Variable manufacturing overhead is assigned to Fludex on the basis of direct labor-hours. Variable manufacturing overhead costs during November totaled $4,800.During November, the company produced 3,600 units of Fludex.Required:For direct materials:Compute the price and quantity variances.The materials were purchased from a new supplier who is anxious to enter into a long-term purchase contract. Would you recommend the company sign the contract?For direct labor:Compute the rate and efficiency variances.In the past, the 20 technicians employed in the production of Fludex consisted of 5 senior technicians and 15 assistants. During November, the company experimented with fewer senior technicians and more assistants in order to reduce labor costs. Would you recommend the new labor mix be continued?Compute the variable overhead rate and efficiency variances. recommend the company sign the contract?2. For direct labor:a. Compute the rate and efficiency variances.b. In the past, the 20 technicians employed in the production of Fludex consisted of 5 senior technicians and 15 assistants. DuringNovember, the company experimented with fewer senior technicians and more assistants in order to reduce labor costs. Wouldyou recommend 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.Required 1A Required 1B Required 2ARequired 2BRequired 3For direct materials, compute the price and quantity variances.Note: 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.Materials price varianceMaterials quantity varianceF2,880 URequired 1ARequired 1B >

REQUIRED 1Direct Materials VariancesA. Price Variance:Actual Price per ounce: $198,000 (total cost)…

Answered: recommend the company sign the…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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	Standard Quantity or Hours	Standard Price or Rate	Standard Cost
Direct materials	2.40	ounces	$ 18.00	per ounce	$ 43.20
Direct labor	0.70	hours	$ 14.00	per hour	9.80
Variable manufacturing overhead	0.70	hours	$ 3.00	per hour	2.10
Total standard cost per unit	$ 55.10

Required:

For direct materials:
1. Compute the price and quantity variances.
2. The materials were purchased from a new supplier who is anxious to enter into a long-term purchase contract. Would you recommend the company sign the contract?
For direct labor:
1. Compute the rate and efficiency variances.
2. In the past, the 20 technicians employed in the production of Fludex consisted of 5 senior technicians and 15 assistants. During November, the company experimented with fewer senior technicians and more assistants in order to reduce labor costs. Would you recommend the new labor mix be continued?
Compute the variable overhead rate and efficiency variances.

recommend the company sign the contract?
2. For direct labor:
a. Compute the rate and efficiency variances.
b. In the past, the 20 technicians employed in the production of Fludex consisted of 5 senior technicians and 15 assistants. During
November, the company experimented with fewer senior technicians and more assistants in order to reduce labor costs. Would
you recommend 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.
Required 1A Required 1B Required 2A
Required 2B
Required 3
For direct materials, compute the price and quantity variances.
Note: 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.
Materials price variance
Materials quantity variance
F
2,880 U
Required 1A
Required 1B >

Definition Definition System of assigning an estimated cost to the product (instead of the actual cost) so that the product cost can be determined well in advance and the pricing of the product can be done on time. Since the actual cost cannot be predicted at the initial stage of the production process, the estimated cost is recorded in the books. Any deviation of the estimated cost of the actual cost is adjusted in the books at the end of the period.

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