Pace Labs, Inc. provides mad cow disease testing for both state and federal governmental agricultural agencies....
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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. Direct materials (2 test tubes @ $1.00 per tube) Direct labor (1 hour @ $32 per hour) Variable overhead (1 hour @ $6 per hour) Fixed overhead (1 hour @ $13 per hour) Total standard cost per test $2.00 32.00 6 13 $53.00 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 1,500 tests were conducted, resulted in the following: Direct materials (3,120 test tubes) Direct labor (1,575 hours) Variable overhead Fixed overhead $ 2,652 47,250 8,790 18,375 Monthly budgeted fixed overhead is $18,850. Revenues for the month were $102,000, and selling and administrative expenses were $3,620. 1) Compute the price and quantity variances for direct materials and direct labor. 2) Compute the total overhead variance, 3) Prepare an income statement for management 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. Direct materials (2 test tubes @ $1.00 per tube) Direct labor (1 hour @ $32 per hour) Variable overhead (1 hour @ $6 per hour) Fixed overhead (1 hour @ $13 per hour) Total standard cost per test $2.00 32.00 6 13 $53.00 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 1,500 tests were conducted, resulted in the following: Direct materials (3,120 test tubes) Direct labor (1,575 hours) Variable overhead Fixed overhead $ 2,652 47,250 8,790 18,375 Monthly budgeted fixed overhead is $18,850. Revenues for the month were $102,000, and selling and administrative expenses were $3,620. 1) Compute the price and quantity variances for direct materials and direct labor. 2) Compute the total overhead variance, 3) Prepare an income statement for management
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SOLUTION 1 MATERIAL PRICE VARIANCE STANDARD COST FOR ACTUAL UNITS ACTUAL COST 1 3120 TUBES 2652 468 ... View the full answer
Related Book For
Accounting Principles
ISBN: 978-0470534793
10th Edition
Authors: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso
Posted Date:
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