Question
Problem 23-5A (Part Level Submission) Hart Labs, Inc. provides mad cow disease testing for both state and federal governmental agricultural agencies. Because the company's customers
Hart 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, 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 @ $30 per hour) 30.00
Variable overhead (1 hour @ $7.00 per hour) 7.00
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 2017, when 1,100 tests were conducted, resulted in the following:
Direct materials (2,222 test tubes) $3,933
Direct labor (1,155 hours) 33,495
Variable overhead 7,106
Fixed overhead 13,101
Monthly budgeted fixed overhead is $17,400. Revenues for the month were $73,700, and selling and administrative expenses were $4,500.
Materials price variance $288.80 favorable
Materials quantity variance $41.80 unfavorable
Labor price variance $1,155 favorable
Labor quantity variance $1,650 unfavorable
Total Overhead variance $693 favorable
Make an income statement for management.
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