Hospital Cost Control The Sharon Hospital, a large metropolitan health-care complex, has had much trouble in controlling its accounts receivable. Bills for patients, for various government agencies, and for private insurance companies have frequently been inaccurate and late. This has led to intolerable levels of bad debts and investments in receivables.

You were employed by the hospital as a consultant on this matter. After conducting a careful study of the billing operation, you developed some cur- rently attainable standards that were implemented in conjunction with a flexible budget four weeks ago. You had divided costs into fixed and variable categories. You regarded the bill as the product, the unit of output.

You have reasonable confidence that the underlying source documents for compiling the results have been accurately tallied. However, the bookkeeper has had some trouble summarizing the data. He has provided the following:

Variable costs, including all billing operators, whose compensation is regarded as variable, allowance per standard hour $ 10 Fixed overhead budget variance, favorable 200 Combined budgeted costs for the bills produced 22,500 Denominator variance, favorable 900 Variable-cost ‘“‘spending’”’ variance, unfavorable 2,000 Variable-cost efficiency variance, favorable 2,000 Standard hours allowed for the bills produced, 1,800 Actual hours of input . Fixed-overhead budget . Standard fixed overhead applied . Denominator activity in hours