Problem 23-5A (Part Level Submission) Hart Labs, Inc. provides mad cow disease t

Question

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 @ $1.46 per tube) $2.92 Direct labor (1 hour @ $24 per hour) 24.00 Variable overhead (1 hour @ $6.00 per hour) 6.00 Fixed overhead (1 hour @ $10.00 per hour) 10.00 Total standard cost per test $42.92 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 1,475 tests were conducted, resulted in the following: Direct materials (3,050 test tubes) $4,270 Direct labor (1,550 hours) 35,650 Variable overhead 7,400 Fixed overhead 15,000 Monthly budgeted fixed overhead is $14,000. Revenues for the month were $75,000, and selling and administrative expenses were $5,000. Collapse question part (a) Compute the price and quantity variances for direct materials and direct labor. (Round answers to 0 decimal places, e.g. 5,275.) Materials price variance $ Materials quantity variance $ Labor price variance $ Labor quantity variance $

Explanation / Answer

Direct material variances Direct material price variance $183 Favorable (AQ x AR) - (AQ x SR) = (3050 x $1.40) - (3050 x $1.46) = $4270 - $4453 = $183 Direct material quantity variance $146 Unfavorable (AQ x SR) - (SQ x SR) = (3050 x $1.46) - (2950 x $1.46) = $4453 - $4307 = $146 SQ = 1475 tests x 2 = 2950 test tubes Direct labor variances Direct labor price variance $1550 Favorable (AH x AR) - (AH x SR) = (1550 x $23) - (1550 x $24) = $35650 - $37200 = $1550 AR = $35650 / 1550 = $23 Direct labor quantity variance $1800 Unfavorable (AH x SR) - (SH x SR) = (1550 x $24) - (1475 x $24) = $37200 - $35400 = $1800 SH = 1475 tests x 1 hour = 1475 hours

Related Questions

Navigate

• Browse (All)
• Browse P
• Subjects

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