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P24-5BBonita Labs performs steroid testing services to high schools, colleges, and universities. Because the company deals solely with educational institutions, the price of each test

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P24-5BBonita 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 petri dish @ $1.80 per dish) $ 1.80 Direct labor (0.5 hours @ $20.50 per hour) 10.25 Variable overhead (0.5 hours @ $8 per hour) 4.00 Fixed overhead (0.5 hours @ $5 per hour) _2.50 Total standard cost per test $18.55 The lab does not maintain an inventory of petri dishes. Therefore, the dishes purchased each month are used that month. Actual activity for the month of May 2016, when 2,500 tests were conducted, resulted in the following Direct materials (2,530 dishes) $ 5,060 Direct labor (1,240 hours) 26,040 Variable overhead 10,100 Fixed overhead 5,700 Monthly budgeted fixed overhead is $6,000. Revenues for the month were $55,000, and selling and administrative expenses were $2,000. Instructions (a) Compute the priee and quantity varianees for direet materials and direet labef. (b) Compute the total overhead varianee. (c) Prepare an ineome statement for management. (d) Provide possible explanations for each unfavorable variance. (a) AGKAP Materials price variance: $5,060 +2,530 Materials quantity variance: (AGXSP) - BOXSP 25 .02.51.00 34 14.00 SS4U Labor price variance: ( AKAR) ASR (1.240 X 240 X 520.50 *$26,040 +1,240 Labor quantity variance: (1,240 X $20.50 11.250 X 520.50) *2,500 X.5 (b) Total overhead variance: Orhed 051010055.7001-11.290 X 139 40 *($8 + $5) BONITA LABS Income Statement For the Month Ended May 31, 2017 Service revenue $55,000 Cost of service provided (at standard) ($18.55 X 2,500) 46.375 Gross profit (at standard) 8,625 Variances Materials price $ 506U Materials quantity 54 U Labor price 620 U Labor quantity 205 F Overhead 450 F Total variance-unfavorable 525 Gross profit (at actual) 8,100 Selling and administrative expenses Net Income $6.100 2.000

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