Becton Labs, Incorporated, 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: Direct materials Direct labor Variable manufacturing overhead Total standard cost per unit Standard Quantity or Standard Price or Hours 2.20 ounces 0.70 hours 0.70 hours Rate $23.00 per ounce $ 12.00 per hour $ 3.00 per hour Standard Cost $ 50.60 8.40 2.10 $ 61.10 During November, the following activity was recorded related to the production of Fludex: a. Materials purchased, 11,000 ounces at a cost of $237,600. b. There was no beginning inventory of materials; however, at the end of the month, 2,650 ounces of material remained in ending inventory. c. The company employs 18 lab technicians to work on the production of Fludex. During November, they each worked an average of 190 hours at an average pay rate of $10.50 per hour. d. Variable manufacturing overhead is assigned to Fludex on the basis of direct labor-hours. Variable manufacturing overhead costs during November totaled $6,200. e. During November, the company produced 3,750 units of Fludex. 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 18 technicians employed in the production of Fludex consisted of 5 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.
Becton Labs, Incorporated, 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: Direct materials Direct labor Variable manufacturing overhead Total standard cost per unit Standard Quantity or Standard Price or Hours 2.20 ounces 0.70 hours 0.70 hours Rate $23.00 per ounce $ 12.00 per hour $ 3.00 per hour Standard Cost $ 50.60 8.40 2.10 $ 61.10 During November, the following activity was recorded related to the production of Fludex: a. Materials purchased, 11,000 ounces at a cost of $237,600. b. There was no beginning inventory of materials; however, at the end of the month, 2,650 ounces of material remained in ending inventory. c. The company employs 18 lab technicians to work on the production of Fludex. During November, they each worked an average of 190 hours at an average pay rate of $10.50 per hour. d. Variable manufacturing overhead is assigned to Fludex on the basis of direct labor-hours. Variable manufacturing overhead costs during November totaled $6,200. e. During November, the company produced 3,750 units of Fludex. 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 18 technicians employed in the production of Fludex consisted of 5 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.
Managerial Accounting: The Cornerstone of Business Decision-Making
7th Edition
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Chapter10: Standard Costing And Variance Analysis
Section: Chapter Questions
Problem 70P: Botella Company produces plastic bottles. The unit for costing purposes is a case of 18 bottles. The...
Related questions
Concept explainers
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
Topic Video
Question
Transcribed Image Text:Becton Labs, Incorporated, 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 Standard Price or
Hours
Rate
Direct materials
Direct labor
2.20 ounces
0.70 hours
$ 23.00 per ounce
$ 12.00 per hour
Standard
Cost
$ 50.60
8.40
Variable manufacturing overhead
Total standard cost per unit
0.70 hours
$ 3.00 per hour
2.10
$ 61.10
During November, the following activity was recorded related to the production of Fludex:
a. Materials purchased, 11,000 ounces at a cost of $237,600.
b. There was no beginning inventory of materials; however, at the end of the month, 2,650 ounces of material remained in ending
inventory.
c. The company employs 18 lab technicians to work on the production of Fludex. During November, they each worked an average of
190 hours at an average pay rate of $10.50 per hour.
d. Variable manufacturing overhead is assigned to Fludex on the basis of direct labor-hours. Variable manufacturing overhead costs
during November totaled $6,200.
e. During November, the company produced 3,750 units of Fludex.
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 18 technicians employed in the production of Fludex consisted of 5 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.
Complete this question by entering your answers in the tabs below.
Req 1A
Req 1B
Req 2A
Req 2B
Req 3
Compute the variable overhead rate and efficiency variances. (Indicate the effect of each variance by selecting "F" for
favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)
Variable overhead rate variance
Variable overhead efficiency variance
F
2,385 U
< Req 2B
Req 3 >
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 5 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Managerial Accounting: The Cornerstone of Busines…
Accounting
ISBN:
9781337115773
Author:
Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:
Cengage Learning
Cornerstones of Cost Management (Cornerstones Ser…
Accounting
ISBN:
9781305970663
Author:
Don R. Hansen, Maryanne M. Mowen
Publisher:
Cengage Learning
Principles of Accounting Volume 2
Accounting
ISBN:
9781947172609
Author:
OpenStax
Publisher:
OpenStax College
Managerial Accounting: The Cornerstone of Busines…
Accounting
ISBN:
9781337115773
Author:
Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:
Cengage Learning
Cornerstones of Cost Management (Cornerstones Ser…
Accounting
ISBN:
9781305970663
Author:
Don R. Hansen, Maryanne M. Mowen
Publisher:
Cengage Learning
Principles of Accounting Volume 2
Accounting
ISBN:
9781947172609
Author:
OpenStax
Publisher:
OpenStax College
Financial And Managerial Accounting
Accounting
ISBN:
9781337902663
Author:
WARREN, Carl S.
Publisher:
Cengage Learning,
Managerial Accounting
Accounting
ISBN:
9781337912020
Author:
Carl Warren, Ph.d. Cma William B. Tayler
Publisher:
South-Western College Pub
Essentials of Business Analytics (MindTap Course …
Statistics
ISBN:
9781305627734
Author:
Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson
Publisher:
Cengage Learning