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 stllla lot of complaints about the last increase, particularly from the Insurance companles and government health units. They te now paying only about 80% of what we bill. Im beginning to think the problem is on the cost side." To determine if the Clearwater lab costs are in line with those of other hospltal 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 1,200 blood tests were performed in the tab. b. Small glass plates are used in both types of tests. Duting the past month, the hospital purchased 12.000 plates at a cost of $20,952. This cost is net of a 3% purchase discount. A total of 1.200 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. 1,600 hours of labour time were used in performing smears and blood tests. The cost of this labour time was $13.12000. d. The lab's variable overhead cost last month totalled $5,200. Q. Fixed overhead cost last month totalled $9,050. Clearwater Hospital has never used standard costs. By searching industry literature, howevel you have determined the following nationwide averages for hospital labs: Plateat Three plates are required per lab test. These plates cost $1. 80 mach and are disposed of after the test is completed. Labourf Each shear should require 0.3 hours to complete, and each blood test should require 0.6 hours ta coeplete. The average cost of this lab time is $10 per hour. Overheddiovnrhead cost is based on direct labour-hours. The average rate of variable overhead is 33 per hour. The average rate of fixed overliead is $6 per hour. These rates are based on a denoininatne activity level af 1 , 50 haurs par manth. Required: 1. Compute the materials price variance for the plates purchased last month, and compute a materials quantity varlance 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 varionce).) 2-0. Compute a labour rate variance and a labour efficiency variance for the lab. (Indicate the effect of each variance by selecting "F" for fovorable, "U" for unfovorable, and "None" for no effect (i.e., zero variance), Do not round intermediate colculation and round your final answers to 1 decimal ploce.) 3-a. Compute the variable overhead spending and efficlency variances. (Indicate the effect of each variance by selecting " F " for favorable, " U " for unfovorable, 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. (Indicate the effect of each varionce by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).)
