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 Direct materials Direct labor 2.5 ounces 1.4 hours Variable manufacturing overhead 1.4 hours Total standard cost per unit Standard Price or Rate $20.00 per ounce $22.50 per hour $3.50 per hour During November, the following activity was recorded related to the production of Fludex a. Materials purchased, 12,000 ounces at a cost of $225,000. Required: 1. For direct materials: Standard Cost $50.00 31.50 4.90 $86.40 Page 469 b. There was no beginning inventory of materials, however, at the end of the month, 2,500 ounces of material remained in ending inventory. c. The company employs 35 lab technicians to work on the production of Fludex. During November, they each worked an average of 160 hours at an average pay rate of $22 per hour. d. Variable manufacturing overhead is assigned to Fludex on the basis of direct labor-hours. Variable manufacturing overhead costs during November totaled $18,200. e. During November, the company produced 3,750 units of Fludex. 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? Explain 2. For direct labor a. Compute the rate and efficiency variances. b. In the past, the 35 technicians employed in the production of Fludex consisted of 20 senior technicians and 15 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? Explain. 3. Compute the variable overhead rate and efficiency variances. What relation can you see between this efficiency variance and the labor efficiency variance?

PROELEM 10-14 Basic Variance Analysis (S) LO10-1, (9) LO10-2, (B) LO10-3 Becton Labs, Loc, prodsces varioes chemical compoands for indastrial use. Oet compound, cated Fhadex, is grepared Page t4\} uring an elaborate distilling process: The compury hat developed rtandard cocts for cee unit of Floder as follows: Daring November, the folloming activity was fecorded selated to the production of Fudex 2. Materials purthased, 12,000 cunces at a cost of 5225,000 . b. There was no begining imveatory of materials, bevrver, at the end of the moeth, 2,500 ecaces of material remaind in eadiat ieventor) c. The compary tepplegs 35 lab technicians to wedk ce the production of Fledex. Daring November, they each weried as averabe of l60 hours at an average pay tate of $22 per hoar Novrmber tocaled $15,200. e. Daring November, the compamy peoduced 3,130 units of Fieder PROBLEM 10-14 Basic Variance Analysis (O10-1, LO10-2, L LO10-3 Becton Labs, Inc, produces varjous chemical compounds for industrial use Ore compound, called Fludex is prepared using an elaborate distaling ptocess. Tre coampany bas developed atadard cous for one unit of Fodex as follows: Darins November, the followif activity was recorded related to the prodaction of Fudex 2. Materials parchased, 12,000 ounces at a coat of 5225,000 . b. There was no beginning inventory of materials, howerer, at the end of the month, 2.500 ounces of materiat remained in ending inventery: c. The company ertploss 35 lab technicians to sork on the grodection of Fladex. Durias November, they each worked as averaje of 160 bours at an average pay rate of $22 per bour. d. Vinable magufacturing overbead is assigned to Fludex oa the basit of direct labot bours. Variable manufacturing ovethead costs during November totaled $18,100 e. During November, the company produced 3,750 unsts of Fhidex Required: 1. For direct materials: a. Compute the price and quantity variances b. The materials erere parchased from a new eappler nto is ancooas to eater into a longterm purchase contract Woald you recommend that the company tign the contract' Extain 2. For direct labor: a. Coerpate the rate and efficiency variaces b. In the past, the 35 techniciant emplosed in the production of Fuder consited of 20 senior techiciciant and 15 asistants. During November, the company experimented with feser uenior techniciant and more assistanti in crder to reduce labot coits, Would jou recommend that the new labor mix be continsed? Explain