Question

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 @ $1.60 per tube)		$3.20
Direct labor (1 hour @ $32 per hour)		32.00
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		$54.20

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 1,000 tests were conducted, resulted in the following.

Direct materials (2,100 test tubes)		$3,150
Direct labor (1,040 hours)		32,240
Variable overhead		6,460
Fixed overhead		11,560

Monthly budgeted fixed overhead is $17,040. Revenues for the month were $67,000, and selling and administrative expenses were $4,700

Prepare an income statement for management.

HART LABS, INC. Income Statement                                                                       November 30, 2020For the Month Ended November 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
		$	Neither favorable nor unfavorableUnfavorableFavorable
			Neither favorable nor unfavorableUnfavorableFavorable
			Neither favorable nor unfavorableFavorableUnfavorable
			FavorableUnfavorableNeither favorable nor unfavorable
			Neither favorable nor unfavorableFavorableUnfavorable
DividendsExpensesGross Profit (Actual)Gross Profit (at Standard)Net Income / (Loss)RevenuesTotal ExpensesTotal RevenuesTotal VarianceVariances			UnfavorableNeither favorable nor unfavorableFavorable
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					$

Answer 1

	Particulars	Amount		Amount
	Sales revenue			$67,000
	Cost of service provided (1000*54.20)			$54,200
	Gross provided (at standard)			$12,800
	Variances:
	Materials price variance	$210	Favourable
	Materials quantity variance	$160	UnFavourable
	Labor price variance	$1,040	Favourable
	Labor quantity variance	$1,280	UnFavourable
	Overhead variance (540+440)	$980	Favourable
	Total Variance		Favourable	$790
	Gross profit (actual)			$13,590
	Selling and Administrative Expenses			$4,700
	Net Income / (Loss)			$8,890

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