HOMEWORK: CHAPTERX ? | ezto.mheducation.com/hm.tpx John Fleming, chief administr
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HOMEWORK: CHAPTERX ? | ezto.mheducation.com/hm.tpx John Fleming, chief administrator for Valley View Hospital, is concemed about the costs for tests in the hospital's lab. Charges for lab tests are consistently higher at Valley View than at other hospitals and have resulted in many complaints. Also, because of strict regulations on amounts reimbursed for lab tests received from insurance companies and governmental units have not been high enough to cover lab costs Mr. Fleming has asked you to evaluate costs in the hospital's lab for the past month The following information is available a. Two types of tests are performed in the lab-blood tests and smears. During the past month, 1,050 blood tests and 3,500 smears were performed in the lab b Small glass plates are used in both types of tests. During the past month the hospital purchased 17,500 plates at a cost of $58,800.2,500 of these plates were unused at the end of the month, no plates were on hand at the beginning of the month c During the past month, 2,500 hours of labor time were recorded in the lab at a cost of S27.625. d. The lab's variable overhead cost last month totaled $20.250 Valley View Hospital has never used standard costs. By searching industry literature, however, you have Plates: Three plates are required per lab test. These plates cost $3.50 each and are disposed of after Labor Each blood test should require 0.6 hours to complete, and each smear should require 0.30 Overhead Overhead cost is based on direct labor-hours. The average rate for variable overhead is $7 60 determined the following nationwide averages for hospital labs the test is completed hours to complete. The average cost of this lab time is $11.70 per hour per hour Required: 1. Compute a materials price variance for the plates purchased last month and a materials quantity variance for the plates used last month. (Input all amounts as positive values. Indicate the effect of each variance by selecting "F for favorable, "U" for unfavorable, and "None" for no effect (i.e zero variance).) Materials price variance Materials quantity variance 2. For labor cost in the lab: a Compute a labor rate variance and a labor efficiency variance. (Input all amounts as positive values. Indicate the effect of each variance by selecting "F for favorable, "U" for unfavorable, and "None" for no effect (i.e, zero variance).) Labor rate variance Labor efficiency varianceExplanation / Answer
1. Materials Price Variance = (Actual price - Standard price) x Actual quantity used
= (58,800/17,500 - 3.50) x (17,500 -2500)
=(3.36 - 3.5) x 15,000
= -2,100 or 2,100 F
Materials Quantity Variance = (Actual usage in units - Standard usage in units) x Standard cost per unit
= (15,000 - 3 x {1,050 + 3.500}) x 3.50
= (15,000 - 13,650) x 3.50
= 4,725 U
2. Labour Rate Variance = (Actual rate - Standard rate) x Actual hours worked
= (27,625/2,500 - 11.70) x 2,500
= (11.05 - 11.70) x 2,500
= -1,625 or 1,625 F
Labour Efficiency Variance = (Actual hours - Standard hours) x Standard rate
= (2,500 - {1,050 x 0.6 + 3,500 x 0.3}) x 11.70
= (2,500 - 1,680) x 11.70
= 9,594 U
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