Pace Labs, Inc. provides mad cow disease testing for both state and federal gove
ID: 2469015 • Letter: P
Question
Pace 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, Pace Labs must constantly monitor and control its testing costs. Shown below are the standard costs for a typical test. 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 2014, when 900 tests were conducted, resulted in the following: Monthly budgeted fixed overhead is $17,160. Revenues for the month were $59,400, and selling and administrative expenses were $3,710. Compute the price and quantity variances for direct materials and direct labor.Explanation / Answer
Materials Price Variance = (SP – AP) AQ
= (2 – 1.84)1854 = $296.64
Materials Quantity Variance = (SQ – AQ) SP
= (1800 – 1854)2 = $108(U)
Labor Price Variance = (SP – AP) AH
= (32 – 31)936 = $936
Labor Quantity Variance = (SH – AH) SP
= (900 – 936)32 = $1152(U)
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.