Question

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 Standard Price Standard or Hours or Rate Cost Direct materials 2.00 ounces $21.00 per ounce $42.00 Direct labor 0.90 hours $12.00 per hour 10.80 Variable manufacturing overhead 0.90 hours $ 2.00 per hour 1.80 Totat standard cost per unit $54.60 During November, the following activity was recorded related to the production of Fludex: a. Materials purchased, 10,000 ounces at a cost of $197,000 b. There was no beginning inventory of materials; however, at the end of the month, 2,550 ounces of material remained in ending inventory The company employs 24 lab technicians to work on the production of Fludex. During November, they each worked an average of 170 hours at an average pay rate of $11.50 per hour. d. Variable manufacturing overhead is assigned to Fludex on the basis of direct labor-hours. Variable manufacturing overhead costs during November totaled $4,800. e. During November, the company produced 3,700 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 24 technicians employed in the production of Fludex consisted of 6 senior technicians and 18 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. Reg 1A Reg 1B Reg 2A Reg 26 Reg 3 For direct materials, 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 (... zero variance). Input all amounts as positive values.) Materials pelo variance Materials quantity variance

Answer 1

solution 11 computation of materials Price variance and Quantity variance ram Standard Quantity of materia for actual Production - 3.700 x 2.00 = 7,400 ounces Actual Quantity of material Purchased = 10,000 Actual Quantity of material used to your ounce انه لم 10:000-9,550 07.117,450 Ounce kaa standard Price of material = $21.00 Actual Price of material - $ 1,97.000 10,000 $19.7 material Price variance (SP-AP) X AQ Purchake $ 21-$19.7) x 10000 $ 13,000 F material Quantity variance (sa-AQ)= (4.400- 7,450x21 $ 1,050 U

(16) yes والا مہینہ Direct labour efficiency Nadiance aldricov. the price offered by the now supplier in less than standard Price of makrials, therefore company should sigh long term Purchak contract with the how supplier (2a computation of labour rate and efficiency variance Standard hours of direct labour = 3.700X0.90 3,330 hours roole toit Standard rate of direct labour= $ 12 Per hours Actual hours of direct labour = 24x170 to Gott 02-4080 hours Actual rate of direct labour = $11.50 per hours Direct labour rate variance = (SR- AR) XAH =(18-19.50) X 1080 OUCOX (HOL $ 2040 F toos, GVE (SH-AH) x SR - 63.350 = 4080) X 12 U003! - $ 9,000 V ab NO, thew is a favourable rate variance and unfavourable variance unfavourable efficiency is higher the rate variance, therefore it is

recommended now laboor mixe should not be continued Militer 3,330 hours no dos trahi hoor roola (3) computation of variable overhead rate and Actual rate of variable overhead to record britih efficiency variances ury standard hours of direct labour 3,400 X 0.90 COM Standard rate of variable overhead = $2 per roodit Actual hours af direct labour - Qu X140 - Durit 4080 01:13 2004 - $4,800 $1.17647 4080 0:00 22.0 porih variable one head rate SR-AR) XAHIL Ugyance Dowozal-al-H1002 (Q-1-17647)X4080 3,360 F variable our head efficiency variancela G1 = (SH- Ah): XSR = (3,330–4080)x2 V COOL - =$1500 U
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