Hospital overhead variances, four-variance analysis. The Sharon Hospital, a large metro politan health-care complex, has had difficulty
Question:
Hospital overhead variances, four-variance analysis. The Sharon Hospital, a large metro¬
politan health-care complex, has had difficulty controlling its accounts receivable. Costs cur¬
rently available from the information system are inaccurate and have led to gross errors in reports to government funding agencies that show the hospital is operating at a deficit. The hospital managers are concerned that the poor quality of information could lead to their replacement by others appointed by the government.
With the participation of the billing department, a set of standard costs and standard amounts was developed for 2007. These standard costs can be used in a flexible budget with separate variable-cost and fixed-cost categories. The output unit is defined to be a single bill.
The accountant of Sharon Hospital provides you with the following for April 2007:
Variable overhead costs, allowance per standard hour $ 12 Fixed overhead flexible budget variance $ 240 F Total budgeted overhead costs for the bills prepared $27,000 Production-volume variance $ 1,080 F Variable cost spending variance $ 2,400 U Variable cost efficiency variance $ 2,400 F Standard hours allowed for the bills prepared 1,800 labour-hours Required Form groups of two or more students to compute the following:
1. Actual hours ofinput used 2. Fixed overhead budget 3. Fixed overhead allocated 4. Budgeted fixed overhead rate per hour 5. Denominator level in hours
Step by Step Answer:
Cost Accounting A Managerial Emphasis
ISBN: 9780131971905
4th Canadian Edition
Authors: Charles T. Horngren, George Foster, Srikant M. Datar, Howard D. Teall