Problem 9.22 (Algo) Variance Analysis in a Hospital [LO9-4, LO9-5, LO9.6] John Fleming, chief odministrator for Valley View Hospital, is concerned about the costs for tests in the hospital's iab, Charges for lab tests are consistently higher of Valley View than at other hospitals and have resulted in many complaints. Also. because of strict fegulations on amounts feimbursed for lab tests, payments tecelved from insurance companies and governmental units have not been high enough to cover lab costs. Mc. Fleming has asked you to evaluate costs in the hospital's lab for the past month. The following information is available: a. Two types of tests are performed in the lab-blood tests and smears. During the past month, 550 blood tests and 2,600 smears were performed in the lab. b. 5 mall glass plates are used in both types of tests. During the past month, the hospital purchased 13,000 plates at a cost of 549,400. 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, 1,600 hours of labor time were recorded in the tab at a cost of $16,960. d. The lab's variable overhead cost last month totaled $11,520. Valley View Hospital has never used standard costs. By searching industry literature, however, you have determined the following nationwide averages for hospital lobs: Plates. Three plates are required per lab test. These plates Dost 54.00 each and are disposed of after the test is completed. Labor Each blood test should require 0.4 hours to complete, and each smear should require 0.20 hours to complete. The average cost of this lab time is $11.60 per hour. Overhead: Overhead cost is based on direct iabor-hours. The average rate for variable overhead is $6.70 per hour. Requlred: 1. Compute a materials price vatiance for the plates purchased last month and a materials quantity varlance 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 hospltals, one-half of the workers in the lab are senior technicians and one-haif 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 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. Valiey 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? 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 fovorable, "ur' for unfovorable, and "None" for no effect (ie, rero variance). Input all amounts as positive volues.) 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, Valiey View Hospital employs oniy one-fourth senior techaicisns and three-fourths assistants, Would you recommend that this policy be continued? npute the variable overhead rate and efficlency variances. (Indicate the effect of each variance by selecting "F" for prable, "U" for unfavorable, and "None" for no effect (1.e., zero variance). Input all amounts as positive values) Complete this question by entering your answers in the tabs below. Is there any relation between the variable overhead efficiency variance and the labor effiency vaniance