Question No. 04 The Chief Administrator of Reliable Laboratory is concerned about the costs of tests being performed in the laboratory which operates round the clock. The charges of each test are quite higher than the charges of other competing labs, which have resulted into several complaints from customers. The chief administrator has hired the services of a managerial accountant to evaluate costs being incurred in the laboratory based on the following information: a) Two types of tests are performed in the laboratory i.e blood test and urine test. During past month 3,600 blood tests and 4,800 urine tests were conducted. b) Small glass plates are used in both types of tests. During past month 20,000 plates at the cost of Rs. 47,000 were purchased. At the end of the month 3,000 plates were left unused. c) During past month 2,500 hours of labour time were recorded in the laboratory at the cost of Rs. 750,000. d) The variable overheads cost amounted to Rs. 1,125,000 last month. The Reliable Laboratory some time back had developed the following standards of costs for performing tests: 1) Two plates per test at Rs. 2.50 each 2) Each blood test requires 0.40 hour. 3) Each urine test requires 0.20 hour. 4) The average cost of labour time is Rs. 320 per hour. 5) Overheads cost is based on direct labour hours. The average rate for variable overheads is Rs. 400 per hour. equired: a) Compute the material price and quantity variance for the plates used last month. b) Calculate the labour rate and labour efficiency variance. c) Determine the variable overheads rate and efficiency variance. Indicate any relationship between the variable overheads efficiency variance and the labour efficiency variances. Explain this relationship. d) Usually in every laboratory one-half of the staff is senior technicians and one-half are junior technicians. In an effort to reduce costs of labour, the Reliable Laboratory has employed only one-fourth senior technicians and three-fourth junior technicians. Would you recommend to continue this policy of staff composition? Explain it with some supporting data