John Fleming, chief administrator for Valley Vlew Hospltal, is concerned about the costs for tests in the hospltal'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 companiles and governmental units have not been high enough to cover lab costs. Mr. Fleming has asked you to evaluate costs in the hospltal'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. Durlng the past month, 1,250 blood tests and 3,900 smears were performed in the lab. b. Small glass plates are used in both types of tests. During the past month, the hospltal purchased 19,500 plates at a cost of $73,320. 2900 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, 2,900 hours of labor time were recorded in the lab at a cost of $32,625. d. The lab's varlable overhead cost last month totaled $24,650. Valley Vlew 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 requlred per lab test. These plates cost $4.00 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 $12.10 per hour. Overhead: Overhead cost is based on direct labor-hours. The average rate for varlable overhead is $8.00 per hour. Required: 1. Compute a materlals price varlance for the plates purchased last month and a materlals quantity varlance for the plates used last month. 2. For labor cost in the lab: a. Compute a labor rate varlance and a labor efficlency varlance. b. In most hospltals, one-half of the workers in the lab are senlor techniclans and one-half are assistants. In an effort to reduce costs, Valley Vlew Hospital employs only one-fourth senior techniclans and three-fourths assistants. Would you recommend that this policy be continued? 3-a. Compute the varlable overhead rate and efficlency varlances. 3-b. Is there any relation between the varlable overhead efficlency varlance and the labor efficlency varlance? Complete this question by entering your answers in the tabs below. Compute a 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 (i.e. zero variance). Input all amounts as positive values.) For labor cost in the lab, Compute a labor rate variance and a labor efficiency variance. (Indicate the effect of each variance by selecting " F " for favorable, "U" for unfavorable, and "None" for no effect (i,e., zero variance). Input all amounts as positive values.) 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? Compute the variable overhead rate and efficiency variances. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.) Is there any relation between the variable overhead efficiency variance and the labor efficiency variance
