Question

Hart Labs, Inc. provides mad cow disease testing for both state and federal governmental agricultural agencies....

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

$

Homework Answers

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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