Pace Labs, Inc provides mad cow disease testing for both state and federal governmental agricultural agencies Because the companys 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 (2test tubes $1 46per tube) $2 92 Direct labor (1hour $24per hour) 24 00 Variable overhead (1hour $6per hour) 6 Fixed overhead (1hour $10per hour) 10 Total standard cost per test $42 92 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, when1,500tests were conducted, resulted in the following Direct materials (3,050test tubes) $4,209 Direct labor (1,600hours) 36,800 Variable overhead 7,400 Fixed overhead 15,000 Monthly budgeted fixed overhead is $14,000 Revenues for the month were $75,000, and selling and administrative expenses were $5,000 Compute the price and quantity variances for direct materials and direct labor Materials price variance $ FavorableUnfavorable Materials quantity variance $ FavorableUnfavorable Labor price variance $ FavorableUnfavorable Labor quantity variance $ UnfavorableFavorable Compute the total overhead variance Total Overhead variance $ FavorableUnfavorable Prepare an income statement for management PACE LABS, INC Income Statement For the Month Ended November 30, 2014 Cost of Service Provided (at standard)Gross Profit (actual)Gross Profit (at standard)Labor PriceLabor QuantityMaterials PriceMaterials QuantityNet Income (Loss)OverheadService RevenueSelling and Administrative ExpensesTotal VarianceVariances $ Cost of Service Provided (at standard)Gross Profit (actual)Gross Profit (at standard)Labor PriceLabor QuantityMaterials PriceMaterials QuantityNet Income (Loss)OverheadService RevenueSelling and Administrative ExpensesTotal VarianceVariances Cost of Service Provided (at standard)Gross Profit (actual)Gross Profit (at standard)Labor PriceLabor QuantityMaterials PriceMaterials QuantityNet Income (Loss)OverheadService RevenueSelling and Administrative ExpensesTotal VarianceVariances Cost of Service Provided (at standard)Gross Profit (actual)Gross Profit (at standard)Labor PriceLabor QuantityMaterials PriceMaterials QuantityNet Income (Loss)OverheadService RevenueSelling and Administrative ExpensesTotal VarianceVariances Cost of Service Provided (at standard)Gross Profit (actual)Gross Profit (at standard)Labor PriceLabor QuantityMaterials PriceMaterials QuantityNet Income (Loss)OverheadService RevenueSelling and Administrative ExpensesTotal VarianceVariances $ FUNA Cost of Service Provided (at standard)Gross Profit (actual)Gross Profit (at standard)Labor PriceLabor QuantityMaterials PriceMaterials QuantityNet Income (Loss)OverheadService RevenueSelling and Administrative ExpensesTotal VarianceVariances NAFU Cost of Service Provided (at standard)Gross Profit (actual)Gross Profit (at standard)Labor PriceLabor QuantityMaterials PriceMaterials QuantityNet Income (Loss)OverheadService RevenueSelling and Administrative ExpensesTotal VarianceVariances UNAF Cost of Service Provided (at standard)Gross Profit (actual)Gross Profit (at standard)Labor PriceLabor QuantityMaterials PriceMaterials QuantityNet Income (Loss)OverheadService RevenueSelling and Administrative ExpensesTotal VarianceVariances UNAF Cost of Service Provided (at standard)Gross Profit (actual)Gross Profit (at standard)Labor PriceLabor QuantityMaterials PriceMaterials QuantityNet Income (Loss)OverheadService RevenueSelling and Administrative ExpensesTotal VarianceVariances UNAF Cost of Service Provided (at standard)Gross Profit (actual)Gross Profit (at standard)Labor PriceLabor QuantityMaterials PriceMaterials QuantityNet Income (Loss)OverheadService RevenueSelling and Administrative ExpensesTotal VarianceVariances FUNA Cost of Service Provided (at standard)Gross Profit (actual)Gross Profit (at standard)Labor PriceLabor QuantityMaterials PriceMaterials QuantityNet Income (Loss)OverheadService RevenueSelling and Administrative ExpensesTotal VarianceVariances Cost of Service Provided (at standard)Gross Profit (actual)Gross Profit (at standard)Labor PriceLabor QuantityMaterials PriceMaterials QuantityNet Income (Loss)OverheadService RevenueSelling and Administrative ExpensesTotal VarianceVariances Cost of Service Provided (at standard)Gross Profit (actual)Gross Profit (at standard)Labor PriceLabor QuantityMaterials PriceMaterials QuantityNet Income (Loss)OverheadService RevenueSelling and Administrative ExpensesTotal VarianceVariances $

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Question: Pace Labs, Inc. provides mad cow disease testing for both state and federal governmental agricultural agencies. Because the companys customers are governmental agencies, prices are

Pace Labs, Inc. provides mad cow disease testing for both state and federal governmental agricultural agencies. Because the companys 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 (2test tubes @ $1.46per tube)	$2.92
Direct labor (1hour @ $24per hour)	24.00
Variable overhead (1hour @ $6per hour)	6
Fixed overhead (1hour @ $10per hour)	10
Total standard cost per test	$42.92

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, when1,500tests were conducted, resulted in the following:

Direct materials (3,050test tubes)	$4,209
Direct labor (1,600hours)	36,800
Variable overhead	7,400
Fixed overhead	15,000

Monthly budgeted fixed overhead is $14,000. Revenues for the month were $75,000, and selling and administrative expenses were $5,000.

Compute the price and quantity variances for direct materials and direct labor.

Materials price variance	$	FavorableUnfavorable
Materials quantity variance	$	FavorableUnfavorable
Labor price variance	$	FavorableUnfavorable
Labor quantity variance	$	UnfavorableFavorable

Compute the total overhead variance.

Total Overhead variance

FavorableUnfavorable

Prepare an income statement for management.

PACE LABS, INC. Income Statement For the Month Ended November 30, 2014
Cost of Service Provided (at standard)Gross Profit (actual)Gross Profit (at standard)Labor PriceLabor QuantityMaterials PriceMaterials QuantityNet Income / (Loss)OverheadService RevenueSelling and Administrative ExpensesTotal VarianceVariances	$
Cost of Service Provided (at standard)Gross Profit (actual)Gross Profit (at standard)Labor PriceLabor QuantityMaterials PriceMaterials QuantityNet Income / (Loss)OverheadService RevenueSelling and Administrative ExpensesTotal VarianceVariances
Cost of Service Provided (at standard)Gross Profit (actual)Gross Profit (at standard)Labor PriceLabor QuantityMaterials PriceMaterials QuantityNet Income / (Loss)OverheadService RevenueSelling and Administrative ExpensesTotal VarianceVariances
Cost of Service Provided (at standard)Gross Profit (actual)Gross Profit (at standard)Labor PriceLabor QuantityMaterials PriceMaterials QuantityNet Income / (Loss)OverheadService RevenueSelling and Administrative ExpensesTotal VarianceVariances
Cost of Service Provided (at standard)Gross Profit (actual)Gross Profit (at standard)Labor PriceLabor QuantityMaterials PriceMaterials QuantityNet Income / (Loss)OverheadService RevenueSelling and Administrative ExpensesTotal VarianceVariances	$	FUNA
Cost of Service Provided (at standard)Gross Profit (actual)Gross Profit (at standard)Labor PriceLabor QuantityMaterials PriceMaterials QuantityNet Income / (Loss)OverheadService RevenueSelling and Administrative ExpensesTotal VarianceVariances		NAFU
Cost of Service Provided (at standard)Gross Profit (actual)Gross Profit (at standard)Labor PriceLabor QuantityMaterials PriceMaterials QuantityNet Income / (Loss)OverheadService RevenueSelling and Administrative ExpensesTotal VarianceVariances		UNAF
Cost of Service Provided (at standard)Gross Profit (actual)Gross Profit (at standard)Labor PriceLabor QuantityMaterials PriceMaterials QuantityNet Income / (Loss)OverheadService RevenueSelling and Administrative ExpensesTotal VarianceVariances		UNAF
Cost of Service Provided (at standard)Gross Profit (actual)Gross Profit (at standard)Labor PriceLabor QuantityMaterials PriceMaterials QuantityNet Income / (Loss)OverheadService RevenueSelling and Administrative ExpensesTotal VarianceVariances		UNAF
Cost of Service Provided (at standard)Gross Profit (actual)Gross Profit (at standard)Labor PriceLabor QuantityMaterials PriceMaterials QuantityNet Income / (Loss)OverheadService RevenueSelling and Administrative ExpensesTotal VarianceVariances		FUNA
Cost of Service Provided (at standard)Gross Profit (actual)Gross Profit (at standard)Labor PriceLabor QuantityMaterials PriceMaterials QuantityNet Income / (Loss)OverheadService RevenueSelling and Administrative ExpensesTotal VarianceVariances
Cost of Service Provided (at standard)Gross Profit (actual)Gross Profit (at standard)Labor PriceLabor QuantityMaterials PriceMaterials QuantityNet Income / (Loss)OverheadService RevenueSelling and Administrative ExpensesTotal VarianceVariances
Cost of Service Provided (at standard)Gross Profit (actual)Gross Profit (at standard)Labor PriceLabor QuantityMaterials PriceMaterials QuantityNet Income / (Loss)OverheadService RevenueSelling and Administrative ExpensesTotal VarianceVariances	$

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