Question

Problem 24-OSA a-c Hart Labs, Inc. provides madcow 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 controls testing costs. Shown below are the standard costs for a typical test. Direct materials (2 test tubes $1.60 per tube) Direct labor (1 hour $31 per hour) Variable overhead (1 hour $6.00 per hour) Fixed overhead (1 hour $12.00 per hour) Total standard cost per test $3.20 31.00 6.00 12.00 $5220 The lab does not maintain an inventory of test tubes. As a result, the tubes purchased each month are used that month. Actu activity for the month of November 2020, when 1.000 tests were conducted, resulted in the following Direct materials (2,100 test tubes) Direct labor (1,050 hours) Variable overhead Fixed overhead $3,150 31,500 5,760 11,420 Monthly budgeted fixed overhead is $18,000. Revenues for the month were $68,000, and selling and administrative expenses $4,900. Your answer is correct, Compute the price and quantity variances for direct materials and direct labor. Materials price variance ravorable Materials quantity variance Tunfavorable Labor price variance 1050 1050 Favorable Labor quantity variance 1550 Unfavorable SHOW LIST OF ACCOUNTS LINK TO TEXT Your answer is correct Compute the total overhead variance Total Overhead variance 820 Travorable

Answer 1

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Hart Labs

Please note that as variance is favorable so it will be added to Gross profit not deducted from it. I am showing my calculation from Gross Profit as every part above Gross Profit is correct and green checked.

	Amount $
Gross Profit	15,800.00
Add: Total Variance (Favorable)	370.00
Gross Profit (Actual)	16,170.00
Selling and Administrative expense	4,900.00
Net Income / (Loss)	11,270.00

Reasons for unfavorable variance :
Materials quantity variance:	Its is unfavorable because the company used more materials than its budget for 1,475 tests. Standard input is 2 test tubes per test which comes at 1,475*2= 2,950 test tubes but it actually used 3,050 test tubes i.e. 100 tubes more.
Labor quantity variance:	Its is unfavorable because the company used more labor hours than its budget for 1,475 tests. Standard input is 1 hour per test which comes at 1,475*1= 1,475 hours but it actually used 1,550 hours i.e. 75 hours more.