Task 3a Calculate variances, identify possible causes and recommend corrective a

Question

Task 3a

Calculate variances, identify possible causes and recommend corrective actions Prepare operating statements reconciling budgeted and actual Report findings to management in accordance with identified responsibility centers Moran Labs performs steroid testing services to high schools, colleges, and universities. Because the company deals solely with educational institutions, the price of each test is strictly regulated. Therefore, the costs incurred must be carefully monitored and controlled. Shown below are the standard costs for a typical test. The lab does not maintain an inventory of petrie dishes. Therefore, the dishes purchased each month are used that month. Actual activity for the month of May 2012, when 2,500 tests were conducted, resulted in the following. Monthly budgeted fixed overhead is $6,000. Revenues for the month were $58,000, and selling and administrative expenses were $2,000. Hints: Compute all the variances and prepare an operating statement for the management and explain about the possible causes of the variances with identified responsibility centers

Explanation / Answer

Standard Actual Qnty. Rate Amount Qnty. Rate Amount Material 2500 2 5000 2530 2.1 5313 Labor 1250 20 25000 1240 21 26040 voh 625 8 5000 1240        8.15 10100 Material Cost Variance 313 A Labor Cost Variance 1040 A VOH Cost Variance 5100 A

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