Becton Labs Inc. produces various chemical compounds for industrial use. One com

Question

Becton Labs Inc. produces various chemical compounds for industrial use. One compound, called Fludex, is prepared by means of an elaborate distiling process. The company has developed standard costs for one unit of Fludex, as follows: Direct materials Direct labour Variable overhead 2.50 mL at $20 per millilitre 1.60 hours at $24.00 per hour 1.60 hours at S 8.00 per hour During November, the following activity was recorded by the company relative to production of Fludex: b. There was no beginning inventory of materials on hand to start the month; at the end of the month, c. The company employs 35 lab technicians to work on the production of Fludex. During November, each d. Variable manufacturing overhead is assigned to Fludex on the basis of direct labour-hours. Variable e. Fixed overhead is also allocated on the basis of direct labour-hours. The company had budgeted Materials were purchased, 11,800 milliitres at a cost of $259,600 2,500 miltres of material remained in the warehouse unused worked an average of 162 hours at an average rate of $11 per hour manufacturing overhead costs during November totalled $18,400. a. $16,000 for the month but underapplied it by $768 f. During November, 3,750 good units of Fludex were produced. The normal volume for the month is 4,000 good unils. The company's management is anxious to determine the officiency of the activities surrounding the production of Flude. The company's policy is to nvestigate any variance more than 2% different from the relevant standard. Required 1. For materials used in the production of Fludex: a. Compute the price and quantity variances. (Indicate the effeat of each variance by selecting "F" for favourable, "U" for unfavourable, and "None" for no effect (i.e., zero variance).) Materials price variance Materials quantity variance

Explanation / Answer

1.

Working:

2.

Working:

c.

Working:

Material price variance 23600 Unfavourable Material Quantity Variane 1500 Favourable

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