Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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

image text in transcribed
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 hospitals and have resulted in many complaints. Also, because of strict regulations on amounts reimbursed for lab tests, payments recelved 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 following information is avallable: a. Two types of tests are performed in the lab-blood tests and smears. During the past month, 1,000 blood tests and 3,400 smears were performed in the lab. b. Small giass plates are used in both types of tests. During the past month, the hospital purchased 17,000 plates at a cost of $53,040. 2,400 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, 2,400 hours of labor time were recorded in the lab at a cost of $26,400. d. The lab's variable overhead cost last month totaled $19,200. Valley View Hospital has never used standard costs. By searching industry literature, however, you have determined the following nationwide averages for hospltal labs: Plates: Three plates are required per lab test. These plates cost $3.25 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 $1160 per hour. Overhead: Overhead cost is based on direct labor-hours. The average rate for variable overhead is $7.50 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 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

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Research Methods In Accounting

Authors: Malcolm Smith

6th Edition

1529779774, 978-1529779776

More Books

Students also viewed these Accounting questions

Question

List the advantages and disadvantages of the pay programs. page 536

Answered: 1 week ago