Question
Plates: Three plates are required per lab test. These plates cost $3.00 each and are disposed of after the test is completed. Labor: Each blood
Plates: Three plates are required per lab test. These plates cost $3.00 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 $11.00 per hour.
Overhead: Overhead cost is based on direct labor-hours. The average rate for variable overhead is $6.90 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 be continued?
3-a. Compute the variable overhead rate and efficiency variances.
3-b. Is there any relation between the variable overhead efficiency variance and the labor efficiency variance?
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