Problem 25-5A He t Labs ne pro des med co costs for a typical test distese testi

Question

Problem 25-5A He t Labs ne pro des med co costs for a typical test distese testing for both stat" and feder govern entel ng culture ngt gles. Because he company seustomers ere go e mental agerces prices ,re strict y regulated There ore H,Lebs must constant y mer itorard t n o its testing costs Sho n be ov ere th·stande 2.80 3o.co Direct materiais test tube# 41.40 per tube) Direct Labor(1 hour @3G per hour) war1mse overhead (1 hourg6.CO per hour} Fioed overhaad1 hour 0 S12.00 per hour) Total standard eeate The lab does not maintain an frventory oftest t ses As resul the tube* pure asedach monthar used ena: manth Attual activity far the mant e November 2017, wnen 1 400 tests were condutted esultod ir:ha fella ing: Direct materials (2,828 test tubes) Cirect labor (3,442 hours) arisble overhes Fixed overheod 3,478 40,376 7.560 16,366 Monthly budgeted fixed overheo s S16,000, Revenues for the monther·691,000' nd pelling and 4emristrative expanses rer S3,60c comput* the price and auantity vananeoz for Crect matarais and direct labor. (Round answers to 0 doermal placos, o.g. 5,275.) Matarials price vonanca Materials quentty variano Labor price veriance Laber quantty veriances the total overhead veriance. Total Overhead veriance

Explanation / Answer

1 Material Price variance = Actual Quantity XStandard Price -       Actual Price material price Variance = 2848 tubes X $1.40) -   $3478 =$509.20 favorable 2 Material Quantity variance =Standard Price X (Standard Quantity - Actual Quantity)    2 Material Quantity variance =$1.40 X[ (1400*2) - 2848] =   $ 67.20 Unfavorable 3 Labour Rate variance= Actual Time X Standard rate       - Actual cost ) labour rate variance =(1442 hrs *$30) - $40376 =$2884 favorable 4 labour Efficiency Variance = Standard rate ( Standard hours for Actual out put - Actual hours) Labour Efficiency variance =$30 * [ (1400*1hr ) -1442] =    $60 Unfavorable 5 Total over head variance =Budgeted Overhead - Actual overhead Budgeted Over head varable voer head = 1400*1hr *$6 =$8400 Fixed over head =$16000 Total budgeted Over head =$8400+$16000 =$24400 Actual over head =variable + fixed over head = 7560 +$16366 =$23926 Total over head variance =$24400 -$23926 =$474 favorable HART LABS INC Income Statement for month of November 2017 Amount in $ Amount in $ Sales 91000 Less: Cost of goods sold ($50.80*1400) 71120 Gorss profit (Standard) 19880 material price Variance 509.2 favorable material Quantity variance 67.2 Un favorable labour rate variance 2884 favorable Labour Efficiency variance 60 Unfavorable Total over head variance 474 favorable Total variances 3740 favorable 3740 gross profit After vairnaces 23620 Less: Selling & Admin expenses 3600 Operating income 20020

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