Ann Walker, CPA, is the controller for your hospital. For a long time, Walker has been concerned about management control in the hospital, and she finally has developed a new departmental labor control system. It is based on the data in TABLE 16-8 for the obstetrics nursing unit.

Using these data, Walker developed a two-factor variance model for labor costs in the obstetrics department. In Period 1, the variances in this model would be as follows:

Labor rate variance =(Actualrate Budgetedrate) Actualhours

= ($27.00 $27.28) 1,550 = $434.00 (Favorable)

Labor usage variance =(Actuallabor used Budgetedlabor) Budgetedrate = (1,550 4.33 350) $27.28 =$941.16 (Unfavorable)
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A similar model for labor control has been adopted in all other departments. As the chief executive officer of the hospital, are you satisfied with this labor control system? What suggestions for revisions would you make?