Question

Problem 24-05A a-c (Video) (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. $2.92 24.00 Direct materials (2 test tubes @ $1.46 per tube) Direct labor (1 hour @ $24 per hour) Variable overhead (1 hour @ $6.00 per hour) Fixed overhead (1 hour @ $10.00 per hour) Total standard cost per test 6.00 10.00 $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 2020, when 1,475 tests were conducted, resulted in the following. Direct materials (3,050 test tubes) Direct labor (1,550 hours) Variable overhead Fixed overhead $4,270 35,650 7,400 15,000 Monthly budgeted fixed overhead is $14,000. Revenues for the month were $75,000, and selling and administrative expenses were $5,000.

Answer 1

	Total Overhead Variance = Variable Overhead Cost Variance + Fixed Overhead Cost Variance
	Vriable Overhead Cost Variance = ( std Hours * Std Rate ) - (actual Hours * Actual Rate)
			= (1475 test* 1 hour per test *$6 per hour ) - ($7400)
			=$8850-7400
			=$1450 (F)
	Fixed Overhead Cost Variance = Fixed Overhead Absorbed - Actual Overhead Incurred
			= (1475 test*1 hour per test *$10 per hour ) - $15000
			=15750-15000
			=$250 (U)
	Total Overhead Variance = $1450 (F) + ($250 (U))
			=$1200 (F)