Problem 23-5A (Part Level Submission) (a) Problem 23-5A (Part Level Submission)

Question

Problem 23-5A (Part Level Submission)

(a)

Problem 23-5A (Part Level Submission)

Hart Labs, Inc. provides mad cow disease testing for both state and federal governmental agricultural agencies. Because the company’s customers are governmental agencies, prices are strictly regulated. Therefore, Hart Labs must constantly monitor and control its testing costs. Shown below are the standard costs for a typical test.
Direct materials (2 test tubes @ $1.80 per tube) $3.60 Direct labor (1 hour @ $32 per hour) 32.00 Variable overhead (1 hour @ $7.00 per hour) 7.00 Fixed overhead (1 hour @ $12.00 per hour) 12.00     Total standard cost per test $54.60
The lab does not maintain an inventory of test tubes. As a result, the tubes purchased each month are used that month. Actual activity for the month of November 2017, when 1,200 tests were conducted, resulted in the following:
Direct materials (2,448 test tubes) $4,137 Direct labor (1,248 hours) 38,688 Variable overhead 7,068 Fixed overhead 14,940
Monthly budgeted fixed overhead is $16,320. Revenues for the month were $79,200, and selling and administrative expenses were $4,000.

Explanation / Answer

(a) 1) Materials price variance = (Standard Price-Actual Price)*Actual materials used = (1.80-1.69)*2448 = $ 269 Favorable Working: Actual Price = Actual Material cost/Actual Material quantity = $       4,137 /         2,448 = $         1.69 2) Materials Quantity Variance = (Standard Quantity-Actual Quantity)*Standard Price = (2400-2448)*1.80 = $ 86 Unfavorable Working: Standard Quantity = Actual Output*Standard Quantity per unit = 1200*2 =              2,400 3) Labor rate variance = (Standard rate-Actual rate)*Actual labor hours = (32.00-31.00)*1248 = $         1,248 Favorable Working: Actual labor rate = Actual Labor cost/Actual Labor hours = $       38,688 / 1248 = $         31.00 4) Labor quantity variance = (Standard quantity-Actual quantity)*Standard labor rate = (1200-1248)*32 = $ 1,536 Unfavorable Working: Standard Labour hours = Actual Output*Standard Labor hours per unit = 1200*1 = 1200

Related Questions

Navigate

• Browse (All)
• Browse P
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.