Question
Sheffield Labs, Inc. provides mad cow disease testing for both state and federal governmental agricultural agencies. Because the companys customers are governmental agencies, prices are
Sheffield 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, Sheffield 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 2020, when 800 tests were conducted, resulted in the following.
| Direct materials (1,680 test tubes) | $2,856 | |
| 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.
(a)
Correct answer icon
Your answer is correct.
Compute the price and quantity variances for direct materials and direct labor.
| Materials price variance | $ | UnfavorableNeither favorable nor unfavorableFavorable | ||
| Materials quantity variance | $ | FavorableUnfavorableNeither favorable nor unfavorable | ||
| Labor price variance | $ | UnfavorableNeither favorable nor unfavorableFavorable | ||
| Labor quantity variance | $ | UnfavorableNeither favorable nor unfavorableFavorable |
eTextbook and Media
List of Accounts
Attempts: 1 of 3 used
(b)
- Your Answer
- Correct Answer (Used)
Partially correct answer icon
Your answer is partially correct.
Compute the total overhead variance.
| Total Overhead variance | $ | UnfavorableNeither favorable nor unfavorableFavorable |
eTextbook and Media
Solution
List of Accounts
Attempts: 3 of 3 used
(c)
Prepare an income statement for management.
| SHEFFIELD LABS, INC. Income Statement For the Month Ended November 30, 2020November 30, 2020For the Year Ended November 30, 2020 | |||||
| $ | |||||
| DividendsExpensesGross Profit (Actual)Gross Profit (at Standard)Net Income / (Loss)RevenuesTotal ExpensesTotal RevenuesTotal VarianceVariances | |||||
| DividendsExpensesGross Profit (Actual)Gross Profit (at Standard)Net Income / (Loss)RevenuesTotal ExpensesTotal RevenuesTotal VarianceVariances | |||||
| $ | UnfavorableFavorableNeither favorable nor unfavorable | ||||
| Neither favorable nor unfavorableFavorableUnfavorable | |||||
| Neither favorable nor unfavorableFavorableUnfavorable | |||||
| FavorableNeither favorable nor unfavorableUnfavorable | |||||
| Neither favorable nor unfavorableFavorableUnfavorable | |||||
| DividendsExpensesGross Profit (Actual)Gross Profit (at Standard)Net Income / (Loss)RevenuesTotal ExpensesTotal RevenuesTotal VarianceVariances | Neither favorable nor unfavorableFavorableUnfavorable | ||||
| DividendsExpensesGross Profit (Actual)Gross Profit (at Standard)Net Income / (Loss)RevenuesTotal ExpensesTotal RevenuesTotal VarianceVariances | |||||
| DividendsExpensesGross Profit (Actual)Gross Profit (at Standard)Net Income / (Loss)RevenuesTotal ExpensesTotal RevenuesTotal VarianceVariances | |||||
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Financial Accounting
Authors: Paul D. Kimmel, Jerry J. Weygandt, Donald E. Kieso
6th Edition
9780470128848
