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John Fleming, chief administrator for Valley View Hospital, Is concerned about the costs for tests in the hospital's lab. Charges for labtests ore consistently higher
John Fleming, chief administrator for Valley View Hospital, Is concerned about the costs for tests in the hospital's lab. Charges for labtests ore consistently higher at Valley View than at other hospitals and have resulted in many complaints Also, because of strictregulations on amounts reimbursed for lab tests, payments received from insurance companies ond governmental units have not beenhigh enough to cover lab costsMr Fleming has asked you to evaluate costs in the hospital's lab for the past month The following Information is availablea. Two types of tests are performed in the labblood tests and smears During the past month, blood tests and smearswere performed in the labb Small glass plates ore used in both types of tests During the past month, the hospital purchased plates at a cost of $ of these plates were unused at the end of the month, no plates were on n hand at the t beginning of the month.C During the past month, hours of labor time were recorded in the lab ata cost of $d The lab's variable overhead cost last month totaled $Valley Vew Hospital has never used standard costs By searching industry literature, however, you have determined the followingnationwide averages for hospital labsPlates Three plates are required per lab test. These plates cost $ each and are disposed of after the test is completed.Labor Each blood test shoud requre hours to complete, and each smear should require hours to complete The averagper hourcost of this lab time is $ perOverhead Overhead cost is based on direct laborhours. The average rate for variable overhead is $ per hour.Required: Computea materiats price variance for the plates purchesed last month and a materials quantity voriance for the plates used lastmonth For labor cost in the lab:a Compute a labor rate variance and a labor efficiency varianceb in most hospitals, onehalf of the workers in the lab are senior technicians and onehalf are assistonts In on effort to reduce costs,Valley View Hospltal employs only one fourth senior technicians and threefourths assistants Would you recommend that this policybe continued?a Compute the variable overhead rate and efficiency variancesb ls there any relation between the varlable overhead eficiency varlance and the labor efficlency variance?Complete this question by entering your answers in the tabs below.Reg Materals price vananceMaternals quantity vananceReg Compute a matenials prnice vanance for the plates purchased last month and a materials quantity variance for the plates usedlast month. indicate the effect of each variance by selecting F for favorable, U for unfavorable, and "None" for no effectLe zero variance Input all amounts as positive values.Labar rate varanceReq ALabor eficiency varanceReg OYesONOReg AReg For labor cost in the lab, Compute a labor rate variance and a labor efficiency variance. Indicate the effect of each varianceby selecting for favorable, U for unfavorable, and "None" for no effect ie zero variance Input all amounts as positivevaluesReg AReq OrReq BReg AVarabie overtead rate vananceReg BReg BIn most hospitals, onehalf of the workers in the lab are senior technicians and onehalfehalf are assistants. In an effort to reduceReg AVarnabie Overtead eficency vananceReg AReq BReq AReq Req AReq Compute the variable overtead rate and efficiency variances. Indicate the effect of each variance by selecting F forfavorable,U fountavorabie, andTione for no effect e zero variance Input all amounts as positive values.Reg AReq Req AReq Reg Req s there ary relation between the venable overhead efficiency variance and the labor effiiency variance?costs, Valey View Hospital employs only onefourth senior technicians and threefourths assistants. Would you recommendthat this policy be continued?
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