Problem 11-5A (Part Level Submission) (a) Problem 11-5A (Part Level Submission)
ID: 2487079 • Letter: P
Question
Problem 11-5A (Part Level Submission)
(a)
Problem 11-5A (Part Level Submission)
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 @ $1.46 per tube) $ 2.92 Direct labor (1 hour @ $24 per hour) 24.00 Variable overhead (1 hour @ $6 per hour) 6 Fixed overhead (1 hour @ $10 per 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, when 1,500 tests were conducted, resulted in the following:
Direct materials (3,050 test tubes) $ 4,209 Direct labor (1,600 hours) 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.
Explanation / Answer
Material price Varince (SP-AP)*AQ = (1.46-1.32)*3050 Material price Varince (SP-AP)*AQ = $424 Favourable AP 4029/3050 $1.32 SP $1.46 AQ 3050 Material quantity varaince (SQ-AQ)*SP = (3000-3050)*$1.46 Material quantity varaince (SQ-AQ)*SP = $73 Adeverse SQ 1500*2 3000 AQ 3050 SP $1.46 Labor price varaiance Labor price Varince (SR-AR)*AH = (24-23)*1600 Labor price Varince (SR-AR)*AH = $1,600 Favorable AR 36800/1600 $23.00 SR $24.00 1600 Labor quantity varriance Labor Quantity Varince (SH-AH)*SR = (1500-1600)*24 Labor Quantity Varince (SH-AH)*SR = $2400 Adverse SH 1500*1 hr 1,500 AH 1,600 SR $24.00 Overhead Varaince Varaible overhead (Standard) = 1500*$6 $9,000 Fixed overhead (Bugeted) $15,000 Total standard overhead $24,000 Varaible overhead -Actual $7,400 Fixed overhead (Bugeted) $15,000 Total standard overhead $22,400 Overhead Varaince- $1,600 Favorable Material price varaince $424.00 Favourable Material quantity varaince $73.00 Adverse Labor price varaince $1,600.00 Favourable Labor quantity varaince $2,400.00 Adverse Overhead varaince $1,600.00 Favourable