Problem 23-5A (Part Level Submission) (a) Open Show Work Problem 23-5A (Part Lev

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Problem 23-5A (Part Level Submission)

(a)

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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 @ $1.00 per tube) $2.00 Direct labor (1 hour @ $32 per hour) 32.00 Variable overhead (1 hour @ $6.00 per hour) 6.00 Fixed overhead (1 hour @ $13.00 per hour) 13.00     Total standard cost per test $53.00
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 1,400 tests were conducted, resulted in the following:
Direct materials (2,856 test tubes) $2,370 Direct labor (1,442 hours) 44,702 Variable overhead 8,512 Fixed overhead 16,968
Monthly budgeted fixed overhead is $17,030. Revenues for the month were $93,800, and selling and administrative expenses were $4,600.

Explanation / Answer

Compute the price and quantity variances for direct materials and direct labor

Materials price variance (1*2856-2370) 486 Favorable Materials quantity variance (1400*2-2856)1 56 Unfavorable Labor price variance (32*1442-44702) 1442 Favorable Labor quantity variance (1400*1-1442)32 1344 Unfavorable

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