3 Becton Labs, Inc., produces various chemical compounds for industrial use. One
ID: 2579575 • Letter: 3
Question
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 or Rate $17.00 per ounce $13.00 per hour $2.50 per hour Standard Cost Direct materials Direct labor Variable manufacturing overhead Total standard cost per unit 2.30 ounces 0.60 hours 0.60 hours $ 39.10 7.80 1.50 $48.40 02:56:46 During November, the following activity was recorded related to the production of Fludex: a. Materials purchased, 11,500 ounces at a cost of $178,825 b. There was no beginning inventory of materials; however, at the end of the month, 3,150 ounces of material remained in ending C. The company employs 17 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 3,500 units of Fludex. inventory 160 hours at an average pay rate of $11.50 per hour during November totaled $3,000 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 17 technicians employed in the production of Fludex consisted of 4 senior technicians and 13 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.Explanation / Answer
Ans. 1 (a) Material Price Variance = (Standard Price - Actual Price) * Actula Quantity (17 - 15.55) * 11500 1.45 * 11500 16675 F *Actual Price = 178825 / 11500 = 15.55 Material Usage Variance = (Standard Quantity - Actual Quantity) * Standard Price (8050 - 8350) * 17 300 * 17 5100 U *Standard Quantity = 3500 * 2.3 8050 (b) Actual cost per unit By new supplier = 37.10 Standard Cost per unit 39.1 Actual cost per unit is less than standard cost per unit, so company should make long term contract with new supplier. *Actual cost per unit By new supplier = Actual Quantity * Actual Price 2.386 * 15.55 37.1 *Actual Quantity = (11500 - 3150)/3500 2.386 ounces Ans. 2 (a) Labor Rate Variance = (Standard Rate - Actual Rate) * Actual Hour (13 - 11.50) * 2720 4080 F *Actual Hour = 160hour * 17 lab tachnicians 2720 Labor Efficiency Variance = (Standard Hour - Actual Hour) * Standard Rate (2100 - 2720) * 13 8060 U *Standard Hour = 3500 * 0.6 2100 (b) No, the new labor mix should not be continued. Ans. 3 Variable Overhead Rate Variance = (Standard Rate - Actual Rate) * Actual Hour (SR * AH) - (AR * AH) (2.5 * 2720) - 3000 6800 - 3000 3800 Variable Overhead Efficiency Variance = (Standard Hour - Actual Hour) * Standard Rate (2100 - 2720) * 2.5 620 * 2.5 1550 U *Standard Hour = 3500 * 0.6 2100
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.