Question

CALCULATOR PRINTER VERSION RACK 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 $1.70 per tube) Direct labor (1 hour $32 per hour) Variable overhead (1 hour $7.00 per hour) Fixed overhead (1 hour $13.00 per hour) Total standard cost per test $3.40 32.00 7.00 13.00 $55.40 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 1,300 tests were conducted, resulted in the following: Direct materials (2,626 test tubes) Direct labor (1,339 hours) Variable overhead Fixed overhead $3,992 41,509 .500 16,211 Monthly budgeted fixed overhead is $18.460. Revenues for the month were 564.500, and selling and administrative expenses were 13.600 (a) Compute the price and quantity variances for direct materials and direct labor (Round answers to decimal places, .. 5.275.)

Answer 1

(a) Compute the price and quantity variances for direct materials and direct labor. Materials Price Variance $472 Favorable Materials Quantity Variance $44 Unfavorable Labor Price Variance $1,339 Favorable Labor Quantity Variance $1,248 Unfavorable Explanation: |(1) Materials Price Variance Materials Price Variance = [(Actual Quantity x Actual Price) – (Actual Quantity x Standard Price)] Materials Price Variance = [$3,992 - (2,626 test tubes * $1.70 per tube)] Materials Price Variance = [$3,992 – $4,464)] Materials Price Variance = $472 favorable |(2) Material Quantity Variance Actual Quantity Used = 2,626 test tubes Standard Quantity Allowed = (1,300 tests * 2 test tubes per test) = 2,600 test tubes Standard Price = $1.70 per tube

Materials Quantity Variance = [(Actual Quantity * Standard Price) - (Standard Quantity * Standard Price)] Materials Quantity Variance = [(2,626 test tubes * $1.70 per tube) - (2,600 test tubes * $1.70 per tube)] Materials Quantity Variance = ($4,464 - $4,420) Materials Quantity Variance = $44 unfavorable (3) Labor Price Variance Labor Price Variance = [(Actual Hours x Actual Rate) - (Actual Hours x Standard Rate)] Labor Price Variance = ($41,509 - (1,339 hours * $32.00 per hour)] Labor Price Variance = ($41,509 - $42,848) Labor Price Variance = $1,339 favorable |(4) Labor Quantity Variance Standard Hours Allowed = (1,300 tests * 1 hour per test) = 1,300 hours Actual Hours = 1,339 hours Standard Rate = $32.00 per hour Labor Quantity Variance = [(Actual Hours * Standard Rate) – (Standard Hours * Standard Rate)] Labor Quantity Variance = [(1,339 hours * $32.00 per hour) – (1,300 hours * $32.00 per hour)] Labor Quantity Variance = ($42,848 – $41,600) Labor Quantity Variance = $1,248 unfavorable