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Managerial Accounting: Becton Labs

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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 1.7 ounces $6.30 per ounce $10.71
Direct labor .8 hours $12.50 per hour 10.00
Variable manufacturing overhead .80 hours $2.30 per hour 1.84
$22.55
________________________________________

During November, the following activity was recorded relative to production of Fludex:

a. Materials purchased, 10,600 ounces at a cost of $63,600.
b. There was no beginning inventory of materials; however, at the end of the month, 1,600 ounces of material remained in ending inventory.
c. The company employs 40 lab technicians to work on the production of Fludex. During November, they worked an average of 80.00 hours at an average rate of $13.00 per hour.
d. Variable manufacturing overhead is assigned to Fludex on the basis of direct labor-hours. Variable manufacturing overhead costs during November totaled $6,400.
e. During November, 4,500 good units of Fludex were produced.

The company's management is anxious to determine the efficiency of the Fludex production activities.

For direct materials used in the production of Fludex:
(a) 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. Omit the "$" sign in your response.)

Materials price variance $

Materials quantity variance $

________________________________________

For direct labor employed in the production of Fludex:
(a) Compute the 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. Round your answers to the nearest dollar amount. Omit the "$" sign in your response.)

Labor rate variance $

Labor efficiency variance $

________________________________________

(a) 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. Round your answers to the nearest dollar amount. Omit the "$" sign in your response.)

Variable overhead rate variance $

Variable overhead efficiency variance $

________________________________________

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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 1.7 ounces $6.30 per ounce $10.71
Direct labor .8 hours $12.50 per hour 10.00
Variable manufacturing overhead .80 hours $2.30 per hour 1.84
$22.55
________________________________________

During November, the following activity was recorded relative to production of Fludex:

a. Materials purchased, 10,600 ounces at a cost of $63,600.
b. There was no beginning inventory of materials; however, at the end of the month, 1,600 ounces of material remained in ending inventory.
c. The company employs 40 lab technicians to work on the production of Fludex. During November, they worked an average of 80.00 hours at an average rate of ...

Solution Summary

This solution is comprised of a detailed explanation to compute the price and quantity variances.

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