Question
Hart Labs, Inc. provides mad cow disease testing for both state and federal governmental agricultural agencies. Because the companys customers are governmental agencies, prices are
Hart 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, Hart 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)$2.92Direct labor (1hour @ $24per hour)24.00Variable overhead (1hour @ $6.00per hour)6.00Fixed overhead (1hour @ $10.00per hour)10.00Total 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 2017, when1,475tests were conducted, resulted in the following:
Direct materials (3,050test tubes)$4,270Direct labor (1,550hours)35,650Variable overhead7,400Fixed overhead15,000
Monthly budgeted fixed overhead is $14,000. Revenues for the month were $75,000, and selling and administrative expenses were $5,000.
Compute the overhead controllable variance and the overhead volume variance.
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