Question

Problem 24-05A a-c (Video) (Part Level Submission) Sheridan 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, Sheridan Labs must constantly monitor and control its testing costs. Shown below are the standard costs for a typical test. $2.80 30.00 Direct materials (2 test tubes @ $1.40 per tube) Direct labor (1 hour @ $30 per hour) Variable overhead (1 hour @ $6.00 per hour) Fixed overhead (1 hour @ $13.00 per hour) Total standard cost per test 6.00 13.00 $51.80 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 1,200 tests were conducted, resulted in the following. Direct materials (2,520 test tubes) Direct labor (1,236 hours) Variable overhead Fixed overhead $3,276 35,844 7,068 14,592 Monthly budgeted fixed overhead is $19,110. Revenues for the month were $79,200, and selling and administrative expenses were $4,300. (a) Your answer is correct. Compute the price and quantity variances for direct materials and direct labor. Materials price variance Materials quantity variance 252 Favorable 168 Unfavorable 1236 Favorable 1080Unfavorable Labor price variance I 1 Labor quantity variance A Click if you would like to Show Work for this question: Open Show Work

Answer 1

Solution b:

Total overhead variance = Total overhead applied - Actual overhead incurred

= (SH * SR) - Actual overhead

= (1200*1*$19) - ($7,068 + $14,592)

= $1,140 Favorable