# Aspen Medical Laboratory performs comprehensive blood tests for physicians and clinics throughout the Southwest. Aspen uses a standard process-costing system for its comprehensive blood work. Skilled technicians perform the blood tests. Because Aspen uses a standard costing system, equivalent units are calculated using the FIFO method. The standard cost sheet for the blood test follows (these standards were used throughout the calendar year): For the month of November, Aspen reported the following actual results: a. Beginning work in process: 1,250 tests, 60 percent complete b. Tests started: 25,000 c. Ending work in process: 2,500 tests, 40 percent complete d. Direct labor: 47,000 hours at $19 per hour e. Direct materials purchased and used: 102,000 at$4.25 per ounce f. Variable overhead: $144,000 g. Fixed overhead:$300,000 h. Direct materials are added at the beginning of the process. Required: 1. Explain why the FIFO method is used for process costing when a standard costing system has been adopted. 2. Calculate the cost of goods transferred out (tests completed and transferred out) for the month of November. Does standard costing simplify process costing? Explain. 3. Calculate price and quantity variances for direct materials and direct labor.

### Cornerstones of Cost Management (C...

4th Edition
Don R. Hansen + 1 other
Publisher: Cengage Learning
ISBN: 9781305970663

Chapter
Section

### Cornerstones of Cost Management (C...

4th Edition
Don R. Hansen + 1 other
Publisher: Cengage Learning
ISBN: 9781305970663
Chapter 9, Problem 40P
Textbook Problem
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## Aspen Medical Laboratory performs comprehensive blood tests for physicians and clinics throughout the Southwest. Aspen uses a standard process-costing system for its comprehensive blood work. Skilled technicians perform the blood tests. Because Aspen uses a standard costing system, equivalent units are calculated using the FIFO method. The standard cost sheet for the blood test follows (these standards were used throughout the calendar year):For the month of November, Aspen reported the following actual results: a. Beginning work in process: 1,250 tests, 60 percent complete b. Tests started: 25,000 c. Ending work in process: 2,500 tests, 40 percent complete d. Direct labor: 47,000 hours at $19 per hour e. Direct materials purchased and used: 102,000 at$4.25 per ounce f. Variable overhead: $144,000 g. Fixed overhead:$300,000 h. Direct materials are added at the beginning of the process. Required: 1. Explain why the FIFO method is used for process costing when a standard costing system has been adopted. 2. Calculate the cost of goods transferred out (tests completed and transferred out) for the month of November. Does standard costing simplify process costing? Explain. 3. Calculate price and quantity variances for direct materials and direct labor.

1.

To determine

Describe the reason why FIFO method is used for process costing after adopting standard costing.

### Explanation of Solution

The main reason for using FIFO method is that it provides a measure of the current period’s output...

2.

To determine

Compute the cost of goofs transferred out for the month of November and state whether standing costing simplify process costing.

3.

To determine

Compute the price and quantity variance for direct materials and direct labor.

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