Marc Goudreau, administrator of Clearwater Hospital, was puzzled by the prior month's reports. "Every month, it's anyone's guess whether the lab will show a profit or a loss. Perhaps the only answer is to increase our lab fees again." "We can't," replied Rhoda Groves, the controller. "There are still a lot of complaints about the last increase, particularly from the insurance companies and government health units. They're now paying only about 81% of what we bili. I'm beginning to think the problem is on the cost side." To determine if the Clearwater lab costs are in line with those of other hospital labs, Goudreau has asked you to evaluate the costs for the past month, Groves has provided you with the following information: a. Two basic types of tests are performed in the lab-smears and blood tests. During the past month, 2.700 smears and 660 blood tests were performed in the lab. b. Small glass plates are used in both types of tests. During the past month, the hospital purchased 16,000 plates at a cost of $31,360. This cost is net of a 2% purchase discount. A total of 1.600 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, 1,400 hours of labour time were used in performing smears and blood tests. The cost of this labour time was $17,990.00. d. The lab's variable overhead cost last month totalled $4,950. e. Fixed overhead cost last month totalled $8,500. Clearwater 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 teat. These platen cont 82,00 each and are disposed of after the tent is completed. Labourt Each shear hhoold require 0.3 houre to conplete, and each blood test should reguire 0.6 hoers to eoeplete. The. average cont of this lab time is 215 per hoar. overheadioverhead cont is based on direct labour-hours. The average rate of variable overhead is $3 per hour, The average rate of fired overhead ia 58 per hour. These rates are based on a denosinator activity level of 1 , Doo hourn per month. 1. Compute the materials price variance for the plates purchased last month, and compute a materiais 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).) 2-a. Compute a labour rote variance and a labour efficiency variance for the lob. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zer variance). Do not round intermediate calculation and round your final answers to 1 decimat place.) 3-a. Compute the variable overhead spending 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).) 3.b. This part of the question is not part of your Connect assignment. 4. Compute the fixed overhead budget and volume variances, (thdicate the effect of each variance by selecting "F* for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).)
