The maternity wing of the city hospital has two types of patients normal and cesarean The standard quantities of labor and materials per delivery for 20X1 are Normal Cesarean Direct materials (lbs ) 9 0 21 0 Nursing labor (hrs ) 2 5 5 0 The standard price paid per pound of direct materials is $10 00 The standard rate for labor is $16 00 Overhead is applied on the basis of direct labor hours The variable overhead rate for maternity is $30 00 per hour, and the fixed overhead rate is $40 00 per hour Actual operating data for 20X1 are as follows Deliveries produced normal, 4,000 cesarean, 8,000 Direct materials purchased and used 200,000 pounds at $9 5035,000 for normal maternity patients and 165,000 for the cesarean patients no beginning or ending raw materials inventories Nursing labor 50,700 hours10,200 hours for normal patients and 40,500 hours for the cesarean total cost of labor, $580,350 Required Prepare a standard cost sheet showing the unit cost per delivery for each type of patient Compute the materials price and usage variances for each type of patient Compute the labor rate and efficiency variances for each type of patient Conceptual Connection Assume that you know only the total direct materials used for both products and the total direct labor hours used for both products Can you compute the total materials usage and labor efficiency variances Explain Answer Conceptual Connection Standard costing concepts have been applied in the healthcare industry For example, diagnostic related groups (DRGs) are used for prospective payments for Medicare patients Select a search engine (such as Yahoo or Google), and conduct a search to see what information you can obtain about DRGs You might try Medicare DRGs as a possible search topic Write a memo that answers the following questions What is a DRG How are DRGs established How many DRGs are used How does the DRG concept relate to standard costing concepts discussed in the chapter Can hospitals use DRGs to control their costs Explain (please attempt to answer 4 5 however you can)

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The maternity wing of the city hospital has two types of patients: normal and cesarean. The standard quantities of labor and materials per delivery for

The maternity wing of the city hospital has two types of patients: normal and cesarean. The standard quantities of labor and materials per delivery for 20X1 are:

	Normal	Cesarean
Direct materials (lbs.)	9.0		21.0
Nursing labor (hrs.)	2.5		5.0

The standard price paid per pound of direct materials is $10.00. The standard rate for labor is $16.00. Overhead is applied on the basis of direct labor hours. The variable overhead rate for maternity is $30.00 per hour, and the fixed overhead rate is $40.00 per hour.

Actual operating data for 20X1 are as follows:

Deliveries produced: normal, 4,000; cesarean, 8,000.
Direct materials purchased and used: 200,000 pounds at $9.5035,000 for normal maternity patients and 165,000 for the cesarean patients; no beginning or ending raw materials inventories.
Nursing labor: 50,700 hours10,200 hours for normal patients and 40,500 hours for the cesarean; total cost of labor, $580,350.

Required:

Prepare a standard cost sheet showing the unit cost per delivery for each type of patient.
Compute the materials price and usage variances for each type of patient.
Compute the labor rate and efficiency variances for each type of patient.
Conceptual Connection Assume that you know only the total direct materials used for both products and the total direct labor hours used for both products. Can you compute the total materials usage and labor efficiency variances? Explain Answer
Conceptual Connection Standard costing concepts have been applied in the healthcare industry. For example, diagnostic-related groups (DRGs) are used for prospective payments for Medicare patients. Select a search engine (such as Yahoo! or Google), and conduct a search to see what information you can obtain about DRGs. You might try Medicare DRGs as a possible search topic. Write a memo that answers the following questions:
- What is a DRG?
- How are DRGs established?
- How many DRGs are used?
- How does the DRG concept relate to standard costing concepts discussed in the chapter? Can hospitals use DRGs to control their costs? Explain.