John Fleming, chief administrator for Valley View Hospital, is concerned about the costs for tests in the hospital's lab. Charges for labi 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 hospital's tab for the past month. The following information is aailable: a. Two types of tests are performed in the lab-blood tests and smears. During the past month, 1,800 blood tests and 2.400 smears were performed in the lab. 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 $56,400 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, 1150 hours of labor time were recorded in the lab at a cost of $21850 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 $5.00 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 tab time is $20 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 quantity variance for the plates used last month 2. For labor cost in the lab a. Compute a loborrate variance and a labor efficiency variance. Required: 1. Compute a materials price variance for the plates purchased last month and a materials quantity variance for the plates used last month 2. For labor cost in the lab: a. Compute a labor rate variance and a labor efficiency variance. b. 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? 3-a. Compute the variable overhead rate and efficiency variances 3-5. Is there any relation between the variable overhead efficiency varlance and the labor efficiency variance? Complete this question by entering your answers in the tabs below. Reg 1 Reg 2A Reg 28 RegJA Reg 3 Compute n materials price variance for the plates purchased last month and a materials quantity variance for the plates used last month. (Indicate the effect of each variance by selecting "F* for favorable. "U" for unfavorable, and "None for no effect (le, zero varianco). Input all amounts as positive values.) Materials price variance Materials quantity variance 3,5701 4,620 10 Reg 2A > Complete this question by entering your answers in the tabs below. Rea 1 Reg 24 Reg 20 Rega Reg38 For labor cost in the tab, compute a labor rate variance and a labor efficiency variance. (Indicate the effect of each variance by selecting for favorable, u for unfavorable, and "None" for no effect ( ero variance), Input all amounts an positive Laborato Laborcy variance
