Reference no: EM13598400

Moran Labs performs steriod testing services to high schools, colleges and universities. Because the comapny 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 cost for a typical test

• Direct materials (1 petri dish @ $2 per dish) $2.00
• Direct labor (.5 hours @ $20.00 per hour) $10.00
• Variable overhead (0.5 hours @ $8 per hour) $4.00
• Fixed overhead (0.5 hours @ $4 per hour) $2.00
• total standard cost per test $18.00

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 2011, when 2,500 test were conducted, resulted in the following

• Direct materials(2,530 dishes) $5,313
• 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 $58,000 abd selling and administrative expenses were $2,00.
(a) Compute the price and quantity variances for direct materials and direct labor.
(b) Compute the total overhead for variance.
(c) Prepare an income statement for management
(d) Provide possible explanations for each unfavorable variance.