crone labs performs steroid testing services to high schools colleges 543272

Crone 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.

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 2012, when 2,500 tests were conducted, resulted in the following.

Monthly budgeted fixed overhead is $6,000. Revenues for the month were $58,000, and selling and administrative expenses were $2,000.

Instructions

(a) Compute the price and quantity variances for direct materials and direct labor.

(b) Compute the total overhead variance.

(c) Prepare an income statement for management.

(d) Provide possible explanations for each unfavorable variance.