DOS 10 a 101.) PROBLEM 10-12 Variance Analysis in a Hospital (L010-1, L010-2, L010-3] John Fleming, chief administrator for Valley View Hospital, is concerned about the costs for tests in the hospital's lab. Charges for lab tests are consistently higher at Valley View than at other hos- pitals and have resulted in many complaints. Also, because of strict regulations on amounts reim- bursed for lab tests, payments received from insurance companies and governmental units have not been high enough to cover lab costs. Mr. Fleming has asked you to evaluate costs in the hospital's lab for the past month. The fol- lowing information is available: a. Two types of tests are performed in the labblood tests and smears. During the past month, 1.800 blood tests and 2,400 smears were performed in the lab. 6 Aa enovo . Standard Costs and Variances b. Small glass plates are used in both types of tests. During the past month, the hospital purchased 12,000 plates at a cost of $28,200. 1,500 of these plates were unused at the end of the month; no plates were on hand at the beginning of the month. c. During the past month, 1,150 hours of labor time were recorded in the lab at a cost of $13,800. d. The lab's variable overhead cost last month totaled $7,820. Valley View Hospital has never used standard costs. By searching industry literature, however, you have determined the following nationwide averages for hospital labs: Plates: Two plates are required per lab test. These plates cost $2.50 each and are disposed of after the test is completed. Labor: Each blood test should require 0.3 hours to complete, and each smear should require 0.15 hours to complete. The average cost of this lab time is $14 per hour. Overhead: Overhead cost is based on direct labor-hours. The average rate for variable overhead is $6 per hour. Required: 1. Compute a materials price variance for the plates purchased last month and a materials quan- tity variance for the plates used last month. For labor cost in the lab: Compute a labor rate variance and a labor elliciency variance. b. In most hospitals, one-half of the workers in the lab are senior technicians and one-hall are assistants. In an effort to reduce costs. Valley View Hospital emphys only onc-lourth senior technicians and three fourths assistants. Would you recommend that this policy be continued? Explain. 3. Compute the variable overhead rate and efficience Manages there any relation e n wie variable overhead efficiency variance and the labor efficiency Nuriance explain 2 Donna M LAIUIS 1 dl I PROBLEM 10-12 Variance Analysis in a Hospital L010-1, L010-2, L010-3]| John Fleming, chief administrator for Valley View Hospital, is concerned about the costs for tests in the hospital's lab. Charges for lab tests are consistently higher at Valley View than at other hos- pitals and have resulted in many complaints. Also, because of strict regulations on amounts reim- bursed for lab tests, payments received from insurance companies and governmental units have not been high enough to cover lab costs. Mr. Fleming has asked you to evaluate costs in the hospital's lab for the past month. The fol- lowing information is available: a. Two types of tests are performed in the labblood tests and smears. During the past month. 1.800 blood tests and 2,400 smears were performed in the lab. 8 Aa A A enovo Standard Costs and Variances b. Small glass plates are used in both types of tests. During the past month, the hospital purchased 12,000 plates at a cost of $28,200. 1,500 of these plates were unused at the end of the month; no plates were on hand at the beginning of the month. e During the past month, 1,150 hours of labor time were recorded in the lab at a cost of $13.800. d. The lab's variable overhead cost last month totaled $7,820. Valley View Hospital has never used standard costs. By searching industry literature, however, you have determined the following nationwide averages for hospital labs: Plates: Two plates are required per lab test. These plates cost $2.50 each and are disposed of after the test is completed. Labor: Each blood test should require 0.3 hours to complete, and each smear should require 0.15 hours to complete. The average cost of this lab time is $14 per hour. Overhead: Overhead cost is based on direct labor-hours. The average rate for variable overhead is $6 per hour. Required: 1. Compute a materials price variance for the plates purchased last month and a materials quan- tity variance for the plates used last month. For labor cost in the lab: Compute a labor rate variance and a labor elliciency variance. In most hospitals, one-half of the workers in the lab are senior technicians and one-half are assistants. In an effort to reduce costs. Valley View Hospital employs only one-fourth senior technicians and three-fourths assistants. Would you recommend that this policy be continued? Explain. 3. Compute the variable overhead rate and efficiency variances Is there any relation between the variable overhead efficiency variance and the labor elliciency Nurance explain DOS 10 a 101.) PROBLEM 10-12 Variance Analysis in a Hospital (L010-1, L010-2, L010-3] John Fleming, chief administrator for Valley View Hospital, is concerned about the costs for tests in the hospital's lab. Charges for lab tests are consistently higher at Valley View than at other hos- pitals and have resulted in many complaints. Also, because of strict regulations on amounts reim- bursed for lab tests, payments received from insurance companies and governmental units have not been high enough to cover lab costs. Mr. Fleming has asked you to evaluate costs in the hospital's lab for the past month. The fol- lowing information is available: a. Two types of tests are performed in the labblood tests and smears. During the past month, 1.800 blood tests and 2,400 smears were performed in the lab. 6 Aa enovo . Standard Costs and Variances b. Small glass plates are used in both types of tests. During the past month, the hospital purchased 12,000 plates at a cost of $28,200. 1,500 of these plates were unused at the end of the month; no plates were on hand at the beginning of the month. c. During the past month, 1,150 hours of labor time were recorded in the lab at a cost of $13,800. d. The lab's variable overhead cost last month totaled $7,820. Valley View Hospital has never used standard costs. By searching industry literature, however, you have determined the following nationwide averages for hospital labs: Plates: Two plates are required per lab test. These plates cost $2.50 each and are disposed of after the test is completed. Labor: Each blood test should require 0.3 hours to complete, and each smear should require 0.15 hours to complete. The average cost of this lab time is $14 per hour. Overhead: Overhead cost is based on direct labor-hours. The average rate for variable overhead is $6 per hour. Required: 1. Compute a materials price variance for the plates purchased last month and a materials quan- tity variance for the plates used last month. For labor cost in the lab: Compute a labor rate variance and a labor elliciency variance. b. In most hospitals, one-half of the workers in the lab are senior technicians and one-hall are assistants. In an effort to reduce costs. Valley View Hospital emphys only onc-lourth senior technicians and three fourths assistants. Would you recommend that this policy be continued? Explain. 3. Compute the variable overhead rate and efficience Manages there any relation e n wie variable overhead efficiency variance and the labor efficiency Nuriance explain 2 Donna M LAIUIS 1 dl I PROBLEM 10-12 Variance Analysis in a Hospital L010-1, L010-2, L010-3]| John Fleming, chief administrator for Valley View Hospital, is concerned about the costs for tests in the hospital's lab. Charges for lab tests are consistently higher at Valley View than at other hos- pitals and have resulted in many complaints. Also, because of strict regulations on amounts reim- bursed for lab tests, payments received from insurance companies and governmental units have not been high enough to cover lab costs. Mr. Fleming has asked you to evaluate costs in the hospital's lab for the past month. The fol- lowing information is available: a. Two types of tests are performed in the labblood tests and smears. During the past month. 1.800 blood tests and 2,400 smears were performed in the lab. 8 Aa A A enovo Standard Costs and Variances b. Small glass plates are used in both types of tests. During the past month, the hospital purchased 12,000 plates at a cost of $28,200. 1,500 of these plates were unused at the end of the month; no plates were on hand at the beginning of the month. e During the past month, 1,150 hours of labor time were recorded in the lab at a cost of $13.800. d. The lab's variable overhead cost last month totaled $7,820. Valley View Hospital has never used standard costs. By searching industry literature, however, you have determined the following nationwide averages for hospital labs: Plates: Two plates are required per lab test. These plates cost $2.50 each and are disposed of after the test is completed. Labor: Each blood test should require 0.3 hours to complete, and each smear should require 0.15 hours to complete. The average cost of this lab time is $14 per hour. Overhead: Overhead cost is based on direct labor-hours. The average rate for variable overhead is $6 per hour. Required: 1. Compute a materials price variance for the plates purchased last month and a materials quan- tity variance for the plates used last month. For labor cost in the lab: Compute a labor rate variance and a labor elliciency variance. In most hospitals, one-half of the workers in the lab are senior technicians and one-half are assistants. In an effort to reduce costs. Valley View Hospital employs only one-fourth senior technicians and three-fourths assistants. Would you recommend that this policy be continued? Explain. 3. Compute the variable overhead rate and efficiency variances Is there any relation between the variable overhead efficiency variance and the labor elliciency Nurance explain