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 (2 test tubes @ $1.90 per tube)		$3.80
Direct labor (1 hour @ $31 per hour)		31.00
Variable overhead (1 hour @ $6.00 per hour)		6.00
Fixed overhead (1 hour @ $12.00 per hour)		12.00
Total standard cost per test		$52.80

The lab does not maintain an inventory of test tubes. As a result, the tubes purchased each month are used that month. Actual activity for the month of November 2020, when 1,100 tests were conducted, resulted in the following.

Direct materials (2,310 test tubes)		$4,158
Direct labor (1,133 hours)		33,990
Variable overhead		6,534
Fixed overhead		12,309

Monthly budgeted fixed overhead is $15,840. Revenues for the month were $72,600, and selling and administrative expenses were $4,800.

(a)

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

Materials price variance		$		FavorableUnfavorableNeither favorable nor unfavorable
Materials quantity variance		$		UnfavorableFavorableNeither favorable nor unfavorable
Labor price variance		$		FavorableUnfavorableNeither favorable nor unfavorable
Labor quantity variance		$

Expert Answer

1) Direct material price variance-

= (Actual price - Standard price) * Actual quantity used.

Actual price = 4158/2310 = 1.8

Standard price = 1.9

Actual quantity used = 2310

= (1.8 - 1.9) * 2310

= 231 Favorable.

Direct material price variance is favorable because actual price per unit is lesser than standard unit.

2) Direct material quantity variance-

=(Actual quantity - Standard quantity )* Standard rate.

Actual quantity used = 2310

Standard quantity for actual output = 2*1100 = 2200

Standard rate = 1.9

= (2310 - 2200)* 1.9

= 209 Unfavorable.

Direct material quantity variance is unfavorable because, actual quantity used is greater than the standard quantity allowed for actual output.

3) Labor price variance-

=(Actual rate - Standard rate) * Actual hours worked.

Actual rate =33990/1133= 30

Standard rate = 31

Actual hours worked = 1133

= (30 - 31) * 1133

= 1133 Favorable.

Labor price variance is favorable because actual rate per labor hour is lesser than the standard allowed.

4) Labor quantity variance-

= (Actual hours - Standard hours) * Standard rate per hour

Actual hours = 1133

Standard hours = 1 * 1100 = 1100

Standard rate per hour = 31

= (1133 - 1100) * 31

= 64 Unfavorable.

Labor quantity variance is unfavorable because, actual hours used is greater than the standard hours allowed for actual output.

Part B not answered which is

Total Overhead variance