Ayaya Labs, Inc. provides mad cow disease testing for both state and federal gov

Question

Ayaya Labs, Inc. provides mad cow disease testing for both state and federal governmental agricultural agencles. Because the company's customers are governmental agencies, prices are strictly regulated. Therefore, Ayayai Labs must constantly monitor and control its testing costs. Shown below are the standard costs for a typical test. Direct materials (2 test tubes@ $1.40 per tube) Direct labor (1 hour$25 per hour) 2.0 Variable overhead (1 hour G $6.00 per hour) Fixed overhead (1 hour $10.00 per 1000 hour) Total standard cost per test 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 1,770 tests were conducted, resulted in the following Direct materials 3.620 tes"utes) Monthly budgeted fixed overhead is $15,000. Revenues for the month were $83,190, and selling and administrative expenses were $4,800. Compute the price and quantity variances for direct materials and direct labor. (Round answers to 0 decimal places, e.g. 5,275.) Compute the total overhead variance. (Round answers to 0 decimal places, e.g. 5,275.) Prepare an income statement for management. (Round answers to O decimal places, e.g. 5,275.) AYAYAI LABS, INC.

Explanation / Answer

Income Statement Description Amount Revenue             83,190 Prime Cost Direct Material             (4,706) Direct labor          (44,304) Variable overhead             (9,250) Total Prime cost          (58,260) Contribution             24,930 Fixed overhead          (17,970) Selling overhead             (4,800) Net Profit               2,160 Actual output 1770 Material Variance Standard Budgeted based on actual results Actual Price              1.40                                      1.40            1.30 Quanity              2.00                                   3,540          3,620 Cost per unit              2.80                                   4,956          4,706 Total Material Cost varaince                                     (250) Material Price variance = (Standard price - Actual Price) * Actual usage = (1.40-1.30)*3620 362 Material quanitity variance = (Standard Quantity - Actual Quantity) * Budgered Price = (3540 - 3620)*1.40             (112) Actual output 1770 Labor variance Standard Budgeted based on actual results Actual Price            25.00                                   25.00          24.00 Hours              1.00                                   1,770          1,846 Cost per unit            25.00                                 44,250       44,304 Total labor Cost varaince                                         54 Labor Price variance = (Standard price - Actual Price) * Actual usage = (25 - 24)*1846            1,846 Labor quanitity variance = (Standard Quantity - Actual Quantity) * Budgered Price = (1770 - 1846)*25          (1,900) Overhead Variance Actual hours 1846 Recovery rate Standard Usage Total cost Budgeted Usage Budgeted Cost Actuals Variable Overhead              6.00 1            6.00 1846                  11,076            9,250 Fixed Overhead            10.00 1          10.00 1846                  15,000          17,970          16.00                  26,076          27,220 Budgered Overheads          26,076 Actual overheads          27,220 Overhead cost Variance          (1,144)

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