Question

Variance Analysis in a Process-Costing Setting (Chapter 6 Required), Service Firm Aspen Medical Laboratory performs comprehensive blood tests for physicians and clinics throughout the Southwest. Aspen uses a standard process-costing system for its comprehensive blood work. Skilled technicians perform the blood tests. Because Aspen uses a standard costing system, equivalent units are calculated using the FIFO method. The standard cost sheet for the blood test follows (these standards were used throughout the calendar year): Direct materials (4 oz. @ $4.50) $18 Direct labor (2 hrs. $18.00) 36 Variable overhead (2 hrs. @ $5.00) 10 Fixed overhead (2 hrs. @$10.00) 20 Standard cost per test $84 For the month of November, Aspen reported the following actual results: a. Beginning work in process: 1,250 tests, 60 percent complete b. Tests started: 25,000 c. Ending work in process: 2,500 tests, 40 percent complete d. Direct labor: 47,000 hours at $19 per hour e. Direct materials purchased and used: 102,000 at $4.25 per ounce f. Variable overhead: $144,000 g. Fixed overhead: $300,000 h. Direct materials are added at the beginning of the process. Required: 1. Calculate the cost of goods transferred out (tests completed and transferred out) for the month of November. Does standard costing simplify process costing? 2. Calculate price and quantity variances for direct materials and direct labor. If a variance is zero, enter "0" and select "Not applicable" from the drop down box. MPV $ MUV $ LRV $ LEV $

Answer 1

SHEET-1 1) Cost of Goods Transferred out Number of Posts Completed Beginning work in progress - 1250 Tust started - 25000 Less Guding work in prooss (2500) Test completed 23750 Cost of Goods Transferred out (Tusts completed & Trowsherred) Cast of Test completed (23750 € 884) - $19,95,000 Direct labour (42000 hours @ $19) - $ 893000 Direct Material Purchased (1080@shes) - $433100 Variable overhead -$144000 hard overhead - $300000 Total Cost of Goods $37,68,500

SHEET-2 Dou standard Costing simplity ho ass Casting ? Solution Standard Costing are a basis to Calolate Product losts, while process costing Calwlate Costs of a prouss. The Standard Casting helps to determine the expected Goods Costs to produce Goods & the difference behoun Actual e expected Costs are Varianas, whill Process Costing may involve a number of Calculations. This Standard costing Simplity Prouss Casting