High quality homework help from top writers

Every paper is written from scratch. Our top homework writers will please you with excellent quality and timing for your paper

Home Business accounting [SOLVED] Question & Answer: Becton Labs, Inc., produces various chemical compounds for industrial use. One compound, called Fludex, is prepared using an elabor…..

[SOLVED] Question & Answer: Becton Labs, Inc., produces various chemical compounds for industrial use. One compound, called Fludex, is prepared using an elabor…..

Author: Alicen A.

April 17th, 2022

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	Standard Price or Rate			Standard Cost
Direct materials	2.00 ounces	$	30.00	per ounce	$	60.00
Direct labor	0.50 hours	$	14.00	per hour		7.00
Variable manufacturing overhead	0.50 hours	$	3.40	per hour		1.70

					$	68.70

During November, the following activity was recorded relative to production of Fludex:

a.	Materials purchased, 10,000 ounces at a cost of $287,000.
b.	There was no beginning inventory of materials; however, at the end of the month, 3,000 ounces of material remained in ending inventory.
c.	The company employs 20 lab technicians to work on the production of Fludex. During November, they worked an average of 130 hours at an average rate of $12.00 per hour.
d.	Variable manufacturing overhead is assigned to Fludex on the basis of direct labor-hours. Variable manufacturing overhead costs during November totaled $4,700.
e.	During November, 3,400 good units of Fludex were produced .

Required:

1.	For direct materials:

a.	Compute the price and quantity variances. (Input all amounts as positive values. Indicate the effect of each variance by selecting “F” for favorable, “U” for unfavorable, and “None” for no effect (i.e, zero variance).)

Don't use plagiarized sources. Get Your Custom Essay on

[SOLVED] Question & Answer: Becton Labs, Inc., produces various chemical compounds for industrial use. One compound, called Fludex, is prepared using an elabor…..

From $8/Page

Order Essay

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?

	Yes
	No

2.	For direct labor:

a.	Compute the rate and efficiency variances. (Input all amounts as positive values. Indicate the effect of each variance by selecting “F” for favorable, “U” for unfavorable, and “None” for no effect (i.e, zero variance).)

In the past, the 20 technicians employed in the production of Fludex consisted of 4 senior technicians and 16 assistants. During November, the company experimented with fewer senior technicians and more assistants in order to save costs. Would you recommend that the new labor mix be continued?

	Yes
	No

3.	Compute the variable overhead rate and efficiency variances. (Input all amounts as positive values. Indicate the effect of each variance by selecting “F” for favorable, “U” for unfavorable, and “None” for no effect (i.e, zero variance).)

Expert Answer

Standard Cost for 1 Unit:
	Quantity	Rate Per Unit	Amount
Direct materials	2.00	30	60.00
Direct labor	0.50	14	7.00
Variable manufacturing overhead	0.50	3.4	1.70
		Total	68.70
Standard Cost for Actual Production:
	Quantity	Rate Per Unit	Amount
Direct materials	6800	30	204000
Direct labor	1700	14	23800
Variable manufacturing overhead	1700	3.4	5780
		Total	233580

Actual Data:	Production	3400
Direct materials	7000	28.7	200900	3100
Direct labor	2600	12	31200	-7400
Variable manufacturing overhead	2600	1.81	4700	1080
			236800


Direct Material Based Questions:

Direct Material Price Variance:	(Standard Price – Actual Price)Actual Qty Consumed
	(30-28.7)*7000
	9100	Favourable

Direct Material Quantity Variance:	(Standard Qty – Actual Qty)Standard Price
	(6800-7000)*30
	-6000	Adverse

Since the Material Price Variance is positive and Favourable, we should enter into contract with Supplier


Direct Labor Based Questions:

Direct Labor Rate Variance:	(Standard Rate – Actual Rate)Actual Hours
	(14-12)*2600
	5200	Favourable

Direct Labor Efficency Variance:	(Standard Hours- Actual Hours)Standard Rate
	(1700-2600)*14
	-12600	Adverse
Overall Labor Variance	-7400

Since the Overall Labor Variance is Negative, So this labor mix is not benefitting to Company
It is beneficial as far as rate is concerned but not for Efficency wise.


Variable Cost Based Questions:

Variable Cost Rate Variance:	(Standard Rate – Actual Rate)Actual Hours
	(3.4-1.81)*2600
	4140	Favourable

Variable Cost Efficency Variance:	(Standard Hours- Actual Hours)Standard Rate
	(1700-2600)*3.4
	-3060	Adverse
Overall	1080

becton labs inc. produces various