elaborate distilling process. The company has developed standard costs for one unit of Fludex, as follows: Standard Quantity or Hours 2.5 ounces Standard Price or Rate $20.00 per ounce $22.50 per hour $ 3.50 per haur Standard Cost Direct materials $ 50.00 Direct labor 1.4 hours 31. 50 Variable manufacturing overhead Total standard cost per unit 1.4 hours 4.90 $ 86.40 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. 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 overhesd 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. 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 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? 3. Compute the variable overhead rate and efficiency variances.
elaborate distilling process. The company has developed standard costs for one unit of Fludex, as follows: Standard Quantity or Hours 2.5 ounces Standard Price or Rate $20.00 per ounce $22.50 per hour $ 3.50 per haur Standard Cost Direct materials $ 50.00 Direct labor 1.4 hours 31. 50 Variable manufacturing overhead Total standard cost per unit 1.4 hours 4.90 $ 86.40 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. 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 overhesd 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. 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 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? 3. Compute the variable overhead rate and efficiency variances.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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.
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Transcribed Image Text:Becton Labs, Inc., produces vorious 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, es follows:
Standard Quantity
or Hours
Standard Price
or Rate
$20.00 per ounce
Standard
Cost
Direct materials
2.5 ounces
$ 5e.ee
Direct labor
1.4 hours
$22.58 per hour
31.50
Variable manufacturing overhead
Total standard cost per unit
1.4 hours
$ 3.50 per hour
4.90
$ 86.48
During November, the following sctivity was recorded related to the production of Fludex:
a. Materials purchased, 12,000 ounces at a cost of $225,000.
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 en average pay rate of $22 per hour.
d. Variable manufacturing overhesd is assigned to Fludex on the basis of direct labor-hours. Varisble manufacturing overhead costs
during November totaled $18,200.
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 variences.
b. In the past, the 35 technicions employed in the production of Fludex consisted of 20 senior technicians and 15 ossistents. During
November, the company experimented with fewer senior techniciens and more ossistants in order to reduce labor costs. Would you
recommend that the new lebor 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
Req1B
Req 2A
Req 28
Req 3
For direct materials, compute the price and quantity 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.)
Materials price variance
Materials quantity variance
< Req 1A
Req1B >
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