Question

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 @ $1.00 per tube) Direct labor (1 hour @ $32 per hour) Variable overhead (1 hour @ $6.00 per hour) Fixed overhead (1 hour @ $13.00 per hour) $2.00 32.00 6.00 13.00 $53.00 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 1,400 tests were conducted, resulted in the following: Direct materials (2,856 test tubes) Direct labor (1,442 hours) Variable overhead Fixed overhead $2,370 44,702 8,512 16,968 Monthly budgeted fixed overhead is $17,030. Revenues for the month were $93,800, and selling and administrative expenses were $4,600. (a) Compute the price and quantity variances for direct materials and direct labor. (Round answers to o decimal places, e.g. 5,275.) Materials price variance Materials quantity variance Labor price variance Labor quantity variance Click if you would like to Show Work for this question: Open Show Work

Answer 1

Materials price variance = (Actual price - Standard price) *Actual quantity Materials price variance = (Actual price * Actual quantity) - (Standard price*Actual quantity) Materials price variance = $2,370 - (2,856*$1) Materials price variance = $2,370 - $2,856 Materials price variance = $486 Favorable Materials quantity variance = (Actual quantity - Standard quantity) *Standard price Materials quantity variance = [2,856 - (1,400*2)]*$1 Materials quantity variance = (2,856 - 2,800)*$1 Materials quantity variance = $56 Unfavorable Labor price variance = (Actual price - Standard price) *Actual hours Labor price variance = (Actual price* Actual hours) - (Standard price*Actual hours) Labor price variance = $44,702 - ($32*1,442) Labor price variance = $44,702 - $46,144 Labor price variance = $1,442 Favorable Labor quantity variance = (Actual hours - Standard hours) *Standard price Labor quantity variance = [1,442-(1,400*1) *$32 Labor quantity variance = (1,442 - 1,400) *$32 Labor quantity variance = $1,344 Unfavorable