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
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 $ 305 Favorable
- Materials quantity variance $ 75 Unfavorable
- Labor price variance $ 3200 Favorable
- Labor quantity variance $ 2500 Unfavorable
Compute the total overhead variance.
Incorrect.Prepare an income statement for management. (List amounts from largest positive to smallest positive followed by most negative to least negative, e.g. 15, 14, 10, -17, -5, -1. For negative numbers use either a negative sign preceding the number eg -45 or parentheses eg (45).)