Overhead variances, four-variance analysis. A large metropolitan health-care complex, General Hospital, has had difficulty controlling its accounts receivable. Costs currently available from the information system are inaccurate and have led to gross errors in reports to the various government funding agencies which has indicated that the hospital appears to be operating at a deficit. The hospital administration is concerned that the poor quality of information could lead to their replacement.

With the participation of the billing department, a set of standard costs and standard amounts was developed for 2010. 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 General Hospital provides you with the following for April 2010:LO1

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Variable overhead costs, allowance per standard hour Fixed overhead flexible budget variance Total budgeted overhead costs for the bills prepared Production-volume variance Variable cost spending variance Variable cost efficiency variance Standard hours allowed for the bills prepared $ 12 $ 240 F $27,000 $ 1,080 F $ 2,400 U $ 2,400 F 1,800 labour-hours