hw 11.4

John Fleming, chief administrator for Valley View Hospital, is concerned about the costs for tests in the hospitals lab. Charges for lab tests are consistently higher at Valley View than at other hospitals and have resulted in many complaints. Also, because of strict regulations on amounts reimbursed 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 hospitals lab for the past month. The following information is available:

Two types of tests are performed in the labblood tests and smears. During the past month, 1,400 blood tests and 4,200 smears were performed in the lab.

Small glass plates are used in both types of tests. During the past month, the hospital purchased 21,000 plates at a cost of $71,820. 3,200 of these plates were unused at the end of the month; no plates were on hand at the beginning of the month.

During the past month, 3,200 hours of labor time were recorded in the lab at a cost of $36,480.

The labs variable overhead cost last month totaled $28,160.

Valley View Hospital has never used standard costs. By searching industry literature, however, you have determined the following nationwide averages for hospital labs:

Plates: Three plates are required per lab test. These plates cost $3.60 each and are disposed of after the test is completed.

Labor: Each blood test should require 0.8 hours to complete, and each smear should require 0.40 hours to complete. The average cost of this lab time is $12.40 per hour.

Overhead: Overhead cost is based on direct labor-hours. The average rate for variable overhead is $8.30 per hour.

Required:

1. Compute a materials price variance for the plates purchased last month and a materials quantity variance for the plates used last month. (Input all amounts as positive values. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e, zero variance).)

Matarials price variance Materiala quantity variance 2. For labor cost in the lab a. Compute a labor rate variance and a labor efficiency variance. (Input all amounts as positive values. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e, zero variance).) Labor rate vanance Labor afficioney variance