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 2.50 ounces $ 19.00 per ounce $ 47.50 Direct labor 0.70 hours $ 15.00 per hour 10.50 Variable manufacturing overhead 0.70 hours $ 4.00 per hour 2.80 $ 60.80 During November, the following activity was recorded relative to production of Fludex: a. Materials purchased, 12,500 ounces at a cost of $223,125. b. There was no beginning inventory of materials; however, at the end of the month, 3,250 ounces of material remained in ending inventory. c. The company employs 21 lab technicians to work on the production of Fludex.
During November, they worked an average of 150 hours at an average rate of $12.50 per hour. d. Variable manufacturing overhead is assigned to Fludex on the basis of direct labor-hours. Variable manufacturing overhead costs during November totaled $5,100. e. During November, 3,500 good units of Fludex were produced .
1. For direct materials:
a. Compute the price and quantity variances.
2. For direct labor:
a. Compute the rate and efficiency variances
3. Compute the variable overhead rate and efficiency variances.