Answer:
Becton Labs, Inc.
1. Direct materials:
a. Price variance
= $20,600 Favorable
Quantity variance
= $1,890 Unfavorable
b. The company can sign the contract provided it is made clear to the new supplier that price variations would not be welcome shortly after signing the contract, but will depend on the market realities.
2. Direct labor:
a. Direct labor rate and efficiency variances:
Direct labor rate variance
= $3,200 Favorable
Efficiency variance
= $8,160 Unfavorable
b. I would not recommend that the new labor mix be continued. The old mix may be working better because the labor efficiency cost increased with the new mix labor mix.
3. The variable overhead rate and efficiency variances:
Variable overhead rate variance
= $5,200 Favorable
Variable overhead efficiency variance
= $2,380 Unfavorable
Explanation:
a) Data and Calculations:
Standard Costs for 1 Unit of Fludex:
Standard Standard Standard Cost
Quantity or Hours Price or Rate
Direct materials 2.40 ounces $27.00 per ounce $64.80
Direct labor 0.60 hours $12.00 per hour 7.20
Variable manufacturing
overhead 0.60 hours $3.50 per hour 2.10
Total standard cost per unit $74.10
Activities recorded during November:
a. Materials purchased = 13,000 ounces at $330,300
Each ounce = $25.41 (330,300/13,000)
b. Materials used for production = 10,150 ounces (13,000 - 2,850)
Standard materials = 4,200 * 2.40 = 10,080 ounces
c. Direct labor hours = 20 * 160 = 3,200 hours
Standard labor hours = 0.60 * 4,200 = 2,520
Average labor rate = $11.00 per hour
Direct labor costs = $35,200 ($11.00 * 3,200)
d. Standard variable overhead = $11,200 (3,200 *$3.50)
Actual overhead incurred = $6,000
Actual overhead rate = $1.43 ($6,000/4,200)
e. Units produced = 4,200
1. Direct materials:
a. Price variance = (Actual price - standard price)* Actual units
= ($25.41 - $27.00)13,000 = $20,600 F
Quantity variance = (Actual quantity - Standard quantity) Standard Cost
= (10,150 - 10,080) * $27.00
= $1,890 U
b. The company can sign the contract provided it is made clear to the new supplier that price variations would not be welcome shortly after signing the contract, but will depend on the market realities.
2. Direct labor:
a. Direct labor rate and efficiency variances:
Direct labor rate variance = (Actual rate - Standard rate) * Actual hours
= ($11 - $12) * 3,200 = $3,200 Favorable
Efficiency variance = (Actual hours - Standard hours) * Standard rate
= (3,200 - 2,520) * $12
= $8,160 Unfavorable
b. I would not recommend that the new labor mix be continued. The old may be working better because the labor efficiency cost increased.
3. The variable overhead rate and efficiency variances:
Variable overhead rate variance = Actual costs − (AH × SR)
= $6,000 - (3,200 * $3.50)
= $6,000 - $11,200
= $5,200 Favorable
Variable overhead efficiency variance = (AH − SH) × SR
= (3,200 - 2,520) * $3.50
= $2,380 Unfavorable
