Problem 9-22 (Algo) Variance Analysis in a Hospital [LO9-4, LO9-5, LO9-6] John Fleming, chiof administrator for Valley View Hospital, is concemed 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 teimbursed for lab tests, parments recelved from insurance companies and governmental units have not been Wigh enough to cover lab costs. Mit. Fleming has asked you to evaluate costs in the hospitars lob for the past month. The foliowing information is available: a. Two types of tests are performed in the lab-blood tests and smears. During the past morth, 600 blood tests and 2,700 smears were performed in the lab. b. Smatl glass plates are twed in both bypes of tests During the past month, the hospital purchased 13,500 plates at a cost of $38,070 1,700 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, 1,700 hours of labor time were recorded in the lab at a cost of $18,105. d. The lab's variable overheod cost last month totaled $12,410 Valiey View Hospilal has never used standard costs. By searching industry literature, however, you have determined the following nationwide averages for hospital labs: Patex Three plates are required per lab iest. These plates cost $3.00 each and are disposed of aftor the test is complated. Labor fach blood test should require 0.6 hours to complete, and each smear should require 030 hours to complete. The average cost of this lab time is 511.70 per hour. Overhend Overhear cotr is based on dinect labor hours. The average rate for variable overthead is $6.80 per hour. Regulred: Required: 1 Compute omaterials price varance for the plates purchased last month and a materials quantity variance for the plates used last mointh. 2. For labor cost in the isb: a. Compote a labor rate variance and o labor eticiency variance. b. In most hospitals, one-haif of the workers in the lab are sonior tectinicians and one-half are assistants. In an effiort to ceduce costs. be continued