Hi-Tek labs performs steroid testing services to high schools, colleges, and universities. Because the company deals solely with educational institutions, the price of each test is strictly regulated. Therefore, the costs incurred must be carefully monitored and controlled. Shown below are the standard costs for a typical test.

Direct materials (1 petrie dish @ $2.00 per dish) $ 2.00

Direct labor (0.5 hours @ $20.00 per hour) 10.00

Variable Overhead (0.5 hours @ $8.00 per hour) 4.00

Total standard variable cost per test $16.00

The lab does not maintain an inventory of petrie dishes. Therefore, the dishes purchased each month are used that month. Actual activity for the month of May 2010, when 2,000 tests were conducted, resulted in the following.

Direct materials (2,020 dishes used) $ 4,242

Direct labor (995 hours) $ 20,895

Variable overhead $ 8,100

REQUIRED:

Compute the price and quantity variances for direct materials. (5 pts.)

Compute the rate and efficiency variances for direct labor. (5 pts.)

Compute the rate and efficiency variances for variable overhead (5 pts.)

Provide possible explanations for each unfavorable variance. (5 pts.)