10 Check my work Problem 10-14 Basic Variance Analysis [LO10-1, LO10-2, LO10-3)
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Question
10 Check my work Problem 10-14 Basic Variance Analysis [LO10-1, LO10-2, LO10-3) 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 Cost $16.00 per ounce 35.20 9.60 2.00 s 46.88 2.20 ounces 0.80 hours Direct materials Direct labor Variable manufacturing overhead .80 hours Total standard cost per unit $12.80 per hour 2.50 per hour During November, the following activity was recorded related to the production of Fludex b. There was no beginning inventory of materials; however, at the end of the month, 3,100 ounces of material remained in ending inventory c. The company employs 23 lab technicians to work on the production of Fludex. During November, they each worked an average of 150 hours at an average pay rate of $11.00 per hour d. Variable manufacturing overhead is assigned to Fludex on the basis of direct labor-hours. Variable manufacturing overhead K Prev 3 of 6 Next> 02 PM ????018 e here to searchExplanation / Answer
b. No.
The favorable price variance means the purchase price offered by the new supplier is lower than the standard price. However, the quantity variance is unfavorable. This could be due to the material purchased from the new supplier being of sub-standard quality. It is thus recommended that the company should not sign the contract with the new supplier.
b. No.
The change in labor mix resulted in a favorable labor rate variance due to lower number of senior technicians however, it also resulted in an unfavorable labor efficiency variance and hence should not be continued with.
1 Direct material variances a. Price variance $15400 Favorable (AQP x AP) - (AQP x SP) = (11000 x $14.60) - (11000 x $16) = $160600 - $176000 = $15400 AP = $160600 / 11000 = $14.60 Quantity variance $3200 Unfavorable (AQ x SP) - (SQ x SP) = (7900 x $16) - (7700 x $16) = $126400 - $123200 = $3200 AQ = 11000 - 3100 = 7900 SQ = 3500 units x 2.20 ounces = 7700 ouncesRelated Questions
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