Connect- Inkernelt Explore Exam #4(Chs 10,12) 150 pts Due June 160 Help Save & E

Question

Connect- Inkernelt Explore Exam #4(Chs 10,12) 150 pts Due June 160 Help Save & Exit Submit 4 Problem 10-12 Variance Analysis in a Hospital (LO10-1, LO10-2, LO10-3) John Fleming, chief administrator for Valley View Hospital, Is concerned about the costs for bests in the hospital's lab. Charges for lab tests are consistendly higher at Valley View than at other hospitals and have resulted in many complants. Also, because of stnict reguiations on amounts reimbursed for lab tests, payments received from nsurance companies and governmenta units have not been high enough to cover lab costs Mr. Fleming has asked you to evaluate costs in the hosptal's lab for the past month The folowing information is available a Two types of tests are performed in the lab-blood tests and smears During the past month, 1,450 blood tests and 4,300 smears were performed in the lab b Smal glass plabes are used in both types of tests During the past month, the hospital purchased 21,500 plates at a cost of 853.105. 3,300 of these plstes were unused at the end of the month no plates were on hand at the beginning of the month c. During the past month, 3,300 hours of labor time were recorded in the lab at a cost of $37 785 d The lab's vartable overhead cost tost month totaled $29.370 Valley View Hospital has never used standard costs. By searching industry Iserature, however, you have determined the folowing nationwide averages for hospital labs Plates Theee plates are required per lab test These piates cost $2.60 each and ave disposed of after the test is completed Labor Each blood s average cost of this lsb time is $12 50 per hour est should require 0.8 hours to complete, and each smear should require 0.40 hours to complete. The Overhead cost is based on drect labor-hours. The average rate for variable overhead is 58 40 per hour ompute a materials price variance for the plates purchased last month and a materials quandity variance for the plates ned 2 For labor cost in the lab a Compute a labor rate variance and a labor efficiency varance one half of the most hosptsls costs, Valey View Hospital employs only one fourth senior technicians that this policy be conenued workers in the lab are senior technicians and one-half are assistants In an effort so and three fourths assitants. Would you recommend 3-a. Compute the variable overhead rate and eficiency varnances is there any nelation between the variabile owwithead efficiency variance snd the labor efmicency variance? Cemplete this question try entering your answers in the tals below FS

Explanation / Answer

Computation of Standard Quantity Allowed Blood tests 1450 Smears 4300 Total 5750 Plates per test 3 Standard quantity allowed 17250 (1)Computation of Material Price & Quanitity Variance Materials price variance = AQ (SP – AP) Actual Cost per Plates =53105/21500=2.47 Material Price Variance =17250*(2.60-2.47)=2242.50 F Materials quantity variance = SP (SQ – AQ) $2.60 X (17250 plates – (21500-3300 plates) ) 2.60*(17250-18200)=$2470 U 2(a)Computation of Labour Price & Efficiency Variance Blood tests: 0.80 hour per test × 1450 tests= 1160 Hours Smears: 0.40 hour per test ×4300 tests= 1720 Hour Total standard hours allowed:- 2880 Hour Labor rate variance = AH (SR – AR) 3300 hours ($12.50 per hour – $11.45 per hour*) =3465F *$37785 ÷ 3300 hours = $11.45 per hour Labor efficiency variance = SR (SH – AH) = 12.50*(2880-3300)=5250 U 2(b) The policy probably should not be continued 3(a)Computation of Variable Overhead rate & Efficiency Variance Variable overhead spending variance = AH (SR – AR) 3300 hours ($8.40 per hour – $8.87 per hour*) =1551U $29270/3300 =$8.87 Labor efficiency variance = SR (SH – AH) "$8.40*(2880-3300)=$3528 U 3(b)Yes, there is a close relation between the two variances

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