Problem 10-14 Basic Variance Analysis [LO10-1, LO10-2, LO10-3] Becton Labs, Inc.

Question

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 arn elaborate distilling process. The company has developed standard costs for one unit of Fludex, as follows: points Standard Price or Rate $24.00 per ounce $15.00 per hour 3.50 per hour Standard Quantity or Hours Standard eBook Cost Direct materials Direct labor Variable manufacturing overhead Total standard cost per unit 2.30 ounces 0.80 hours 0.80 hours $55.20 12.00 2.80 $70.00 Print During November, the following activity was recorded related to the production of Fludex a. Materials purchased, 12,500 ounces at a cost of $282,500 b. There was no beginning inventory of materials; however, at the end of the month, 3,000 ounces of material remained in ending c. The company employs 26 lab technicians to work on the production of Fludex. During November, they each worked an average of d. Variable manufacturing overhead is assigned to Fludex on the basis of direct labor-hours. Variable manufacturing overhead costs e. During November, the company produced 4,100 units of Fludex. inventory 150 hours at an average pay rate of $14.00 per hour. during November totaled $8,000

Explanation / Answer

1) for direct materials a. price and quantity variance Standard - Actual * Actual = Variance price price quantiy materials price variance 24 22.6 12,500 = 17500 F standard - Actual * Standard = Variance qty qty price materials quantity variance 9430 9,500 24 1680 U b. yes 2) for direct labor Standard - Actual * Actual = Variance rate rate hours labor price variance 15 14 3900 = 3900 F standard - Actual * Standard = Variance hours hours rate labor efficiency variance 3280 3,900 15 9300 U b. no 3) for variable overhead Standard - Actual * Actual = Variance rate rate hours Variable overhead rate 3.5 2.05 3,900 = 5650 F standard - Actual * Standard = Variance hours hours rate variable overhead efficiency 3280 3,900 3.5 2170 U

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