Problem 11-5A

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 @ $1.80 per tube)		$3.60
Direct labor (1 hour @ $30 per hour)		30.00
Variable overhead (1 hour @ $7.00 per hour)		7.00
Fixed overhead (1 hour @ $13.00 per hour)		13.00
Total standard cost per test		$53.60

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 2017, when 800 tests were conducted, resulted in the following:

Direct materials (1,664 test tubes)		$2,746
Direct labor (840 hours)		24,360
Variable overhead		5,280
Fixed overhead		10,080

Monthly budgeted fixed overhead is $17,160. Revenues for the month were $52,000, and selling and administrative expenses were $4,100.

Tell if variances are favorable or unfavorable. Please use the labels already there on income statement

Prepare an income statement for management. Service Revenue Cost of Service Provided (at standard) Gross Profit (at standard) Variances Materials Price Materials Quantity Labor Price Labor Quantity Overhead Total Variance Gross Profit (actual) Selling and Administrative Expenses Net Income (Loss) HART LABS, INC. Income Statement For the Month Ended November 30, 2017