Required:

For direct materials:

a$.$ Compute the price and quantity variances.

b$.$ The materials were parchased from a new supplier who is anxious to enter into a lonsterm purchase contract. Would jou recommend that the company sign the contract? Explain.

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. Dering November, the company experimented with fewer senior technicians and more assistants in order to reduce labor corts. Would you recommend that the new labor mix be continued? Explain.

Compute the variable overhead rate and efficiency variances. What relation can you see between this efficiency variance and the labor efficiency variance?

PROBLEM $10-14$ Basic Variance Analysis LO$10-1,$ LO$10-2,$ LO$10-3$

Becton Labs, Inc, produces various chemical compounds for industrial use. One compound, called Fludex, is prepared

Page $469$ using an elaborate distilling process. The company has developed standard costs for one unit of Fludex, as follows:

$\backslash$table$[[,\backslash$table$[[$Standard$],[$Quantity$],[$or Hours$]],\backslash$table$[[$Standard Price$],[$or Rate$]],\backslash$table$[[$Standard$],[$Cost$]]],[$Direct materials,$2\mathrm{.}5$ ounces,$$20\mathrm{.}00$ per ounce,$$50\mathrm{.}00$