Question
. Two basic types of tests are performed in the labsmears and blood tests. During the past month, 2,400 smears and 400 blood tests were
. | Two basic types of tests are performed in the labsmears and blood tests. During the past month, 2,400 smears and 400 blood tests were performed in the lab. |
b. | Small glass plates are used in both types of tests. During the past month, the hospital purchased 12,000 plates at a cost of $37,440. This cost is net of a 4% purchase discount. A total of 1,400 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, 1,400 hours of labor time were used in performing smears and blood tests. The cost of this labor time was $14,700. |
d. | The labs variable overhead cost last month totaled $9,800. |
Cottonwood Hospital has never used standard costs. By searching industry literature, however, you have determined the following nationwide averages for hospital labs: |
Plates: | Three plates are required per lab test. These plates cost $3.25 each and are disposed of after the test is completed. |
Labor: | Each smear should require 0.20 hours to complete, and each blood test should require 0.40 hours to complete. The average cost of this lab time is $11.40 per hour. |
Overhead: | Overhead cost is based on direct labor-hours. The average rate of variable overhead is $6.50 per hour. |
Required: |
1. | Compute the materials price variance for the plates purchased last month, and compute a materials quantity variance for the plates used last month. (Input all amounts as positive values. Leave no cells blank - be certain to enter "0" wherever required. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance.) |
Materials price variance | $ | |
Materials quantity variance | $ | |
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2. | For labor cost in the lab: |
a. | Compute a labor rate variance and a labor efficiency variance. (Input all amounts as positive values. Leave no cells blank - be certain to enter "0" wherever required. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance.) |
Labor rate variance | $ | |
Labor efficiency variance | $ | |
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b. | In most hospitals, three-fourths of the workers in the lab are certified technicians and one-fourth are assistants. In an effort to reduce costs, Cottonwood Hospital employs only one-half certified technicians and one-half assistants. Would you recommend that this policy be continued? | ||||
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3a. | Compute the variable overhead rate and efficiency variances. (Input all amounts as positive values. Leave no cells blank - be certain to enter "0" wherever required. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance.) |
Variable overhead rate variance | $ | |
Variable overhead efficiency variance | $ | |
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3b. | Is there any relation between the variable overhead efficiency variance and the labor efficiency variance? | ||||
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