Fall City Hospital has an outpatient clinic. Jeffrey Harper, the hospitals chief administrator, is very concerned about cost control and has asked that performance reports be prepared that compare budgeted and actual amounts for medical assistants, clinic supplies, and lab tests. Past financial studies have shown that the cost of clinic supplies used is driven by the number of medical assistant labor hours worked, whereas lab tests are highly correlated with the number of patients served.

The following information is available for June:

• Medical assistants Fall Citys standard wage rate is $16 per hour, and each assistant is expected to spend 30 minutes with a patient. Assistants totaled 860 hours in helping the 1,640 patients seen, at an average pay rate of $17.50 per hour.
• Clinic supplies The cost of clinic supplies used is budgeted at $12 per labor hour, and the actual cost of supplies used was $9,450.
• Lab tests Each patient is anticipated to have three lab tests, at an average budgeted cost of $72 per test. Actual lab tests for June cost $368,016 and averaged 3.3 per patient.

Required:

1. Prepare a report that shows budgeted and actual costs for the 1,640 patients served during June. Compute the differences (variances) between these amounts and label them as favorable or unfavorable.

Budget:	Actual:
	1,640 Patients	1,640 Patients	Variance
Medical assistants				Unfavorable
Clinic supplies				Favorable
Lab tests				Unfavorable
Total	$0	$0		Unfavorable

2. Determine the spending and efficiency variances for lab tests. (Hint: In applying the overhead variance formulas, think of the number of tests as the activity level, and think of the cost per test as analogous to the variable overhead rate.)

Variable-overhead spending variance		Favorable
Variable-overhead efficiency variance		Unfavorable

2.