Problem 9-22 Variance Analysis in a Hospital [LO9.4, LO9-5, LO9.6] John Fleming, chief administrator for Valley View Hospital, is concerned about the costs for tests in the hospitar's lab. Charges for lab tests are consistently higher at Valley View than at other hosptals and have resulted in many comploints. Also, because of strict regutations on amounts relmbursed for tab tests, payments received from insurance componies and governmental units have not been high enough to cover lab costs. Mr. Fleming has asked you to evaluate costs in the hospitars lab for the past month. The following information is available: a. Two types of tests are performed in the lab-biood tests and smears. During the past month, 1,300 blood tests and 4,000 smears were performed in the lab. b. Smatt glass plates are used in both types of tests. During the past month, the hospital purehased 20000 piates at a cost of $79,600.3,000 of these plates were unused at the end of the monthy no plates wete on hand at the beginning of the month. c. During the past momh, 3,000 hours of labor time were recorded in the lab at a cost of $33,900. d. The lab's variable overhead cost iast month totaled $25,800 Valley View Hospital has nevor used standard costs. By searching industry literature, howover, you have determined the following nationwide overages for hospital labs: Plates: Three plates are required per lab test. These plates cost $4.20 each and are disposed of after the test is completed. Labor, Each blood test should require 0.8 hours to complote, and each smear should require 0.40 hours to complete. The average cost of this lob time is $12.20 per hour. Overhead: Overhead cost is based on direct labor hours, The average rate for varinble overhead is $8.10 por hour; Required: 1. Compute a materials price variance for the plates purchesed last month and a materials quantity variance for the plates used last month. 2. For labor cost in the lab: a. Compute a inbor rate variance and a labor etficiency variance. b. In most hospitals, ono-half of the workets 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 assiatants, Would you recommend that this policy be continued? 3-a. Compute the variable overheod rate and efficiency variances. 3.b. Is there any relation between the variable overtheod 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 favorabie, " U for unfavorable, and "None for no effect (i.e., 2ero variance). Input all amounts as positive values.) Complete this question by entering your answers in the tabs below. For labor cost in the Jab, Compute a labor rate variance and a labor efficiency variance. (Indicate the effect of each variance by selecting "F" for Sworable, "U" for untavorable, and "None" for no effect (l.e, zero variance), Input all amounts as positive values:? -a. Compute the variable overhead rate and efficiency variances. 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 the variable overhead rate 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). Input all amounts as positive values.)
