1 ozto.mheducation.com hm.tpx Becton Labs, Inc., produces various chemical compo

Question

1 ozto.mheducation.com hm.tpx Becton Labs, Inc., produces various chemical compounds for industrial use. One compound, called Fludex, is prepared using an elaborate distiling process. The company has developed standard costs for one unit of Fludex, as follows: Direct materials Direct labor Variable manufacturing overhead 0.80 hours3.50 per hour 1.40 ounces $8.00 per ounce $15.00 per hour 11.20 0.80 hours 2.00 2.80 $ 26.00 During November, the following a ctivity was recorded relative to production of Fludex: a. Materials purchased, 7,500 ounces at a cost of $47.250 b. There was no beginning inventory of materials; however, at the end of the month, 2,550 ounces of material remained in ending inventory c. The company employs 12 lab technicians to work on the production of Fludex. During November, they worked an average of 170 hours at an average rate of $15.50 per hour d. Variable manufacturing overhead is assigned to Fludex on the basis of direct labor-hours. Variable manufacturing overhead costs during November totaled $6,800 e. During November, 2,800 good units of Fludex were produced Required: 1. For direct materials: a. Compute the price and quantity variances. (Round your "price per ounce" answers to 2 decimal places. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).) a Variance Materials price variance = Variance Materials quantity variance

Explanation / Answer

1a) Material Price variance = ( Actual price - standard price ) * actual quantity      = (6.75 - 8) * 7500      =1.25 * 7500      = 9375 favourale Material quantity variance = ( standard quantity - actual quantity) * standard price             = (2800 *1.4 - (7500-2550) * 8             = (3920-4950) * 8             = 1030 * 8             = 8240 unfavourable 2a) Labor price variance = ( Actual rate -standard rate ) * actual hours = (15.5 - 15) * 170*12 =0.50* 2040 = 1020 unfavourale Labor quantity variance = ( standard hours - actual hours) * standard rate       = ( 2800 * 0.8 - 170*12) * 15       = ( 2240 - 2040) * 15       = 200 * 15       = 3000 favourable 2b) No, the new mix is not recommended as the price variance is unfavorale 3) variable overhead spending variance = Actual variable overhead - Actual hours * standard variable overhead rate             = 6800 - 2040 * 3.50             = 6800 - 7140             = 340 favourable variable overhead efficiency variance = ( actual hours - standard hours) * standard rate               = ( 2040 - 2240) * 3.50               = 200 * 3.5              = 700 favourable

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