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Rakhi Vasavada
Rakhi Vasavada , Financial and Legal Consultant
Category: Finance
Satisfied Customers: 2535
Experience:  Graduated in law with Emphasis on Finance and have have been working in financial sector for over 12 Years
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Becton Labs, Inc., produces various chemical compounds for

Customer Question

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 1.4 ounces $5.60 per ounce $7.84
Direct labor .6 hours $11.90 per hour 7.14
Variable manufacturing overhead .60 hours $2.50 per hour 1.50
$16.48


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

a. Materials purchased, 8,580 ounces at a cost of $45,474.
b. There was no beginning inventory of materials; however, at the end of the month, 2,100 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 44.00 hours at an average rate of $12.30 per hour.

d. Variable manufacturing overhead is assigned to Fludex on the basis of direct labor-hours. Variable manufacturing overhead costs during November totaled $3,872.

e. During November, 3,600 good units of Fludex were produced.

The company's management is anxious to determine the efficiency of the Fludex production activities.
Requirement 1:
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 $ (Click to select)UFNone
Materials quantity variance $ (Click to select)FUNone

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(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?


(Click to select)YesNo
Requirement 2:
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 $ (Click to select)UNoneF
Labor efficiency variance $ (Click to select)NoneUF

--------------------------------------------------------------------------------

(b) In the past, the 40 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 save costs. Would you recommend that the new labor mix be continued?


(Click to select)NoYes
Requirement 3:
(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 $ (Click to select)UFNone
Variable overhead efficiency variance $ (Click to select)FNoneU

--------------------------------------------------------------------------------

(b) What relation can you see between this efficiency variance and the labor efficiency variance?

(Click to select)Directly related.Independent.

Miller Toy Company manufactures a plastic swimming pool at its Westwood Plant. The plant has been experiencing problems as shown by its June contribution format income statement below:

Budgeted Actual
Sales (5,600 pools) $280,000
$280,000

Variable expenses:
Variable cost of goods sold* 95,760 114,772
Variable selling expenses 23,000 23,000
Total variable expenses 118,760
137,772

Contribution margin 161,240
142,228

Fixed expenses:
Manufacturing overhead 56,000 56,000
Selling and administrative 71,500
71,500

Total fixed expenses 127,500 127,500
Net operating income $33,740
$14,728


--------------------------------------------------------------------------------

*Contains direct materials, direct labor, and variable manufacturing overhead.
Janet Dunn, who has just been appointed general manager of the Westwood Plant, has been given instructions to "get things under control." Upon reviewing the plant's income statement, Ms. Dunn has concluded that the major problem lies in the variable cost of goods sold. She has been provided with the following standard cost per swim
Submitted: 5 years ago.
Category: Finance
Expert:  DanielleCPA replied 5 years ago.

Hi and welcome to Just Answer! I'm happy to help answer your Finance questions.

 

Please advise as to your deadline on this.

 

Also, the second question you posted does not have all the information. It says she has the following information on standard costs but then none of that information is provided.

 

Thanks!

Customer: replied 5 years ago.

My deadline is by 8pm

here is the rest of the problem

 

Miller Toy Company manufactures a plastic swimming pool at its Westwood Plant. The plant has been experiencing problems as shown by its June contribution format income statement below:

Budgeted Actual
Sales (5,600 pools)

$280,000

$280,000

Variable expenses:
Variable cost of goods sold*95,760 114,772
Variable selling expenses23,000 23,000
Total variable expenses

118,760

137,772

Contribution margin

161,240

142,228

Fixed expenses:
Manufacturing overhead56,000 56,000
Selling and administrative

71,500

71,500

Total fixed expenses127,500 127,500
Net operating income

$33,740

$14,728


*Contains direct materials, direct labor, and variable manufacturing overhead.

Janet Dunn, who has just been appointed general manager of the Westwood Plant, has been given instructions to "get things under control." Upon reviewing the plant's income statement, Ms. Dunn has concluded that the major problem lies in the variable cost of goods sold. She has been provided with the following standard cost per swimming pool:

Standard
Quantity or
Hours
Standard Price or
Rate
Standard
Cost
Direct materials4.80 pounds$2.40 per pound $11.52
Direct labor.60 hours $8.30 per hour 4.98
Variable manufacturing overhead.30 hours* $2.00 per hour .60
Total standard cost

$17.10


*Based on machine-hours.

During June the plant produced 5,600 pools and incurred the following costs:

a.Purchased 33,256 pounds of materials at a cost of $2.90 per pound.
b.Used 26,680 pounds of materials in production. (Finished goods and work in process inventories are insignificant and can be ignored.)
c.Worked 3,760 direct labor-hours at a cost of $7.80 per hour.
d.Incurred variable manufacturing overhead cost totaling $4,784 for the month. A total of 2,080 machine-hours was recorded.
It is the company's policy to close all variances to cost of goods sold on a monthly basis.


1. value:
7 points
Requirement 1:
(a)

Compute the direct materials price and quantity variances for June. (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.)


Material price variance$ (Click to select)NoneUF
Material quantity variance$ (Click to select)NoneUF


(b)

Compute the direct labor rate and efficiency variances for June. (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.)


Labor rate variance$ (Click to select)UNoneF
Labor efficiency variance$ (Click to select)UNoneF


(c)

Compute the variable overhead rate and efficiency variances for June. (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.)


Variable overhead rate variance$ (Click to select)NoneUF
Variable overhead efficiency variance$ (Click to select)NoneFU

check my workeBook Links (3) references
WorksheetLearning Objective: 09-2Learning Objective: 09-4
Difficulty: BasicLearning Objective: 09-3


2. value:
5 points
Requirement 2:
(a)

Compute the net overall variance for the month. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Round your answer to the nearest dollar amount. Input the amount as positive value. Omit the "$" sign in your response.)


Net variance$ (Click to select)FUNone
(b)What impact did this figure have on the company's income statement? (Input the amount as positive value. Round your answer to the nearest dollar amount. Omit the "$" sign in your response.)

As an impact of the above figure the company's income statement is showing a (Click to select)reduced profitloss of $ .
check my workeBook Links (3) references
WorksheetLearning Objective: 09-2Learning Objective: 09-4
Difficulty: BasicLearning Objective: 09-3


3. value:
3 points
Requirement 3:

Pick out the most significant variance that you computed in Requirement 1 above.

Variable overhead spending variance
Material quantity variance
Labor efficiency variance
Material price variance
Variable overhead efficiency variance
check my workeBook Links (3) references
Multiple ChoiceLearning Objective: 09-2Learning Objective: 09-4
Difficulty: BasicLearning Objective: 09-3

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