Farm Labs, Inc. provides mad cow disease testing for both state and federal gove
ID: 2383328 • Letter: F
Question
Farm 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, Farm Labs must constantly monitor and control its testing costs. Shown below are the standard costs for a typical test.Direct materials (2 test tubes @ $1.50 per tube) $3
Direct labor (1 hour @ $25 per hour) 25
Variable overhead (1 hour @ $5 per hour) 5
Fixed overhead (1 hour @ $10 per hour) 10
Total standard cost per test $43
The lab does not maintain an inventory of test tubes. Therefore, the tubes purchased each month are used that month. Actual activity for the month of November 2008, when 1,500 tests were conducted, resulted in the following:
Direct materials (3,050 test tubes) $ 4,270
Direct labor (1,600 hours) 36,800
Variable overhead 7,400
Fixed overhead 14,000
Monthly budgeted fixed overhead is $14,000. Revenues for the month were $75,000, and selling and administrative expenses were $4,000.
Compute the price and quantity variances for direct materials and direct labor.
Materials price variance $ FavorableUnfavorable
Materials quantity variance $ UnfavorableFavorable
Labor price variance $ UnfavorableFavorable
Labor quantity variance $ UnfavorableFavorable
Compute the total overhead variance.
$ FavorableUnfavorable
Explanation / Answer
Standards
Actual
Per Test
For 1500 Tests
Per Test
For 1500 Tests
Standards
Actual
Per Test
For 1500 Tests
Per Test
For 1500 Tests
Direct Materials 3 4500 2.85 4270 Direct Labor 25 37500 24.53 36800 Variable Overhead 5 7500 4.93 7400 Fixed Overhead 10 14000 9.33 14000 Total Labor hours 1500 1600Related Questions
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