The emergency room at University
Hospital uses a flexible budget based on patients seen as a measure of volume.
An adequate staff of attending and on-call physicians must be maintained at all
times, so physician scheduling is unaffected by volume. However, nurse scheduling
varies as volume changes. A standard of 0.5 nurse hours per patient visit was
set. Average hourly pay for nurses is $14, ranging from $8 to $17 per hour. All
materials are considered to be supplies, which are a part of overhead; there are
no direct materials. A statistical study showed that the cost of supplies and other
variable overhead is more closely associated with nurse-hours than with patient

visits. The standard for supplies and other variable overhead is $10 per nursing
hour. :
The head physician of the emérgency room unit, Sue Cox, is responsible for
control of costs. During October the emergency room unit treated 4,000 patients.
The budget and actual costs were as follows:

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BUDGET ACTUAL VARIANCE Patient visits Nursing hours 3,800 4,000 200 1,900 2,075 175 Nursing cost $ 26,600 $ 31,050 $4,450 Supplies and other variable overhead 19,000 21,320 2,320 Fixed costs Total cost 92,600 $138,200 92,600 0 $144,970 $6,770 1. Calculate price and usage variances for nursing costs. 2. Calculate spending and usage variances for supplies and other variable overhead. 3. Dr. Cox has been asked to explain the variances to the chief of staff. Provide possible explanations.