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Homework answers / question archive / Becton Labs Inc
Becton Labs Inc. produces various chemical compounds for industrial use. One compound, called Fludex, is prepared by means of an elaborate distilling process. The company has developed standard costs for one unit of Fludex, as follows: Direct materials Direct labour Variable overhead 2.60 1.20 1.20 ML at hours at hours at $ $19 $ 22.00 $10.00 per millilitre per hour per hour During November, the following activity was recorded by the company relative to production of Fludex: a. Materials were purchased, 12,000 millilitres at a cost of $254,400. b. There was no beginning inventory of materials on hand to start the month; at the end of the month, 2,400 mililitres of material remained in the warehouse unused. c. The company employs 35 lab technicians to work on the production of Fludex. During November, each worked an average of 159 hours at an average rate of $13 per hour. d. Variable manufacturing overhead is assigned to Fludex on the basis of direct labour-hours. Variable manufacturing overhead costs during November totalled $17,900. e. Fixed overhead is also allocated on the basis of direct labour-hours. The company had budgeted $7,146 for the month but underapplied it by $343. f. During November, 3,720 good units of Fludex were produced. The normal volume for the month is 3,970 good units. The company's management is anxious to determine the efficiency of the activities surrounding the production of Fludex. The company's policy is to investigate any variance more than 2% different from the relevant standard. Required: 1. For materials used in the production of Fludex: a. Compute the price and quantity variances. (Indicate the effect of each variance by selecting "F" for favourable, "U" for unfavourable, and "None" for no effect (i.e., zero variance).) Answer is complete and correct. Materials price variance Materials quantity variance $ 26,400U $ 1,368 F
b. The materials were purchased from 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 labour employed in the production of Fludex: a. Compute the rate and efficiency variances. (Indicate the effect of each variance by selecting "F" for favourable, "U" for unfavourable, and "None" for no effect (i.e., zero variance).) Answer is complete and correct. $ Labour rate variance Labour efficiency variance 50,085 F 24,222U $ 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 only 15 senior technicians and 20 assistants in order to save costs. Would you recommend that the new labour mix be continued? Yes • No 3-a. Compute the variable overhead spending and efficiency variances. (Indicate the effect of each variance by selecting "F" for favourable, "U" for unfavourable, and "None" for no effect (i.e., zero variance).) Answer is complete but not entirely correct. $ Variable overhead spending variance Variable overhead efficiency variance 26,740 X F 11,010U $
3-b. This part of the question is not part of your Connect assignment. 4. Compute the fixed overhead cost variances for November. (Indicate the effect of each variance by selecting "F" for favourable, "U" for unfavourable, and "None" for no effect (i.e., zero variance).) Fixed overhead budget variance Fixed overhead volume variance
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