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for Valley View Hospital, is concerned about the costs for tests in the hospital's lab. Charges for lab tests are consistently higher at Valley View than at other hospitals and have resulted in many complaints. Also, because of strict regulations on amounts reimbursed for lab tests, payments received from insurance companies and governmental units have not been high enough to cover lab costs. Mr. Fleming has asked you to evaluate costs in the hospital's lab for the past month. The following information is available: Two types of tests are performed in the lab-blood tests and smears. During the past month, 1,500 blood tests and 4,400 smears were performed in the lab. Small glass plates are used in both types of tests. During the past month, the hospital purchased 22,000 plates at a cost of $52,800. 3,400 of these plates were unused at the end of the month; no plates were on hand at the beginning of the month. During the past month, 3,400 hours of labor time were recorded in the lab at a cost of $39,100. The lab's variable overhead cost last month totaled $30,600. Valley View 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 $2.50 each and are disposed of after the test is completed. Labor: Each blood test should require 0.8 hours to complete, and each smear should require 0.40 hours to complete. The average cost of this lab time is $12.60 per hour. Overhead: Overhead cost is based on direct labor-hours. The average rate for variable overhead is $8.50 per hour. 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:

for Valley View Hospital, is concerned about the costs for tests in the hospital's lab. Charges for lab tests are consistently higher at Valley View than at other hospitals and have resulted in many complaints. Also, because of strict regulations on amounts reimbursed for lab tests, payments received from insurance companies and governmental units have not been high enough to cover lab costs. Mr. Fleming has asked you to evaluate costs in the hospital's lab for the past month. The following information is available: Two types of tests are performed in the lab-blood tests and smears. During the past month, 1,500 blood tests and 4,400 smears were performed in the lab. Small glass plates are used in both types of tests. During the past month, the hospital purchased 22,000 plates at a cost of $52,800. 3,400 of these plates were unused at the end of the month; no plates were on hand at the beginning of the month. During the past month, 3,400 hours of labor time were recorded in the lab at a cost of $39,100. The lab's variable overhead cost last month totaled $30,600. Valley View 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 $2.50 each and are disposed of after the test is completed. Labor: Each blood test should require 0.8 hours to complete, and each smear should require 0.40 hours to complete. The average cost of this lab time is $12.60 per hour. Overhead: Overhead cost is based on direct labor-hours. The average rate for variable overhead is $8.50 per hour. 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:

Financial & Managerial Accounting
Financial & Managerial Accounting
13th Edition
ISBN:9781285866307
Author:Carl Warren, James M. Reeve, Jonathan Duchac
Publisher:Carl Warren, James M. Reeve, Jonathan Duchac
Chapter16: Managerial Accounting Concepts And Principles
Section: Chapter Questions
Problem 16.3APR: Cost classifications for a service company A partial list of Foothills Medical Centers costs...
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Paragraph 5 1 Normal 1 No Spac... Heading 1 Heading 2 John Fleming, chief administrator for Valley View Hospital, is concerned about the costs for tests in the hospital's lab. Charges for lab tests are consistently higher at Valley View than at other hospitals and have resulted in many complaints. Also, because of strict regulations on amounts reimbursed for lab tests, payments received from insurance companies and governmental units have not been high enough to cover lab costs. Mr. Fleming has asked you to evaluate costs in the hospital's lab for the past month. The following information is available: Two types of tests are performed in the lab-blood tests and smears. During the past month, 1,500 blood tests and 4,400 smears were performed in the lab. Small glass plates are used in both types of tests. During the past month, the hospital purchased 22,000 plates at a cost of $52,800. 3,400 of these plates were unused at the end of the month; no plates were on hand at the beginning of the month. During the past month, 3,400 hours of labor time were recorded in the lab at a cost of $39,100. The lab's variable overhead cost last month totaled $30,600. Valley View 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 $2.50 each and are disposed of after the test is completed. 2. For labor cost in the lab: Title Labor: Each blood test should require 0.8 hours to complete, and each smear should require 0.40 hours to complete. The average cost of this lab time is $12.60 per hour. Overhead: Overhead cost is based on direct labor-hours. The average rate for variable overhead is $8.50 per hour. Epic AaBbCcD AaBbCcD Subtitle Subtle Em.... 1. Compute a materials price variance for the plates purchased last month and a materials quantity variance for the plates used last month. W] 2N/REH Styles 4W SW 4285 2W/PED 4375 25/PP 4475 21 4425 3T 4575 4T 1147 ST 4220 2E/Antepartum 4275 Cath/Hol 2200 Resp 4415 2300 House Supervisor 2400 Biomed 2500 Labor/Delivery 4200 SPU 2100 Dialysis 4492 Security 4071 4250 MRICat Scan 4017 4030 4068 4895 4860
Transcribed Image Text:Paragraph 5 1 Normal 1 No Spac... Heading 1 Heading 2 John Fleming, chief administrator for Valley View Hospital, is concerned about the costs for tests in the hospital's lab. Charges for lab tests are consistently higher at Valley View than at other hospitals and have resulted in many complaints. Also, because of strict regulations on amounts reimbursed for lab tests, payments received from insurance companies and governmental units have not been high enough to cover lab costs. Mr. Fleming has asked you to evaluate costs in the hospital's lab for the past month. The following information is available: Two types of tests are performed in the lab-blood tests and smears. During the past month, 1,500 blood tests and 4,400 smears were performed in the lab. Small glass plates are used in both types of tests. During the past month, the hospital purchased 22,000 plates at a cost of $52,800. 3,400 of these plates were unused at the end of the month; no plates were on hand at the beginning of the month. During the past month, 3,400 hours of labor time were recorded in the lab at a cost of $39,100. The lab's variable overhead cost last month totaled $30,600. Valley View 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 $2.50 each and are disposed of after the test is completed. 2. For labor cost in the lab: Title Labor: Each blood test should require 0.8 hours to complete, and each smear should require 0.40 hours to complete. The average cost of this lab time is $12.60 per hour. Overhead: Overhead cost is based on direct labor-hours. The average rate for variable overhead is $8.50 per hour. Epic AaBbCcD AaBbCcD Subtitle Subtle Em.... 1. Compute a materials price variance for the plates purchased last month and a materials quantity variance for the plates used last month. W] 2N/REH Styles 4W SW 4285 2W/PED 4375 25/PP 4475 21 4425 3T 4575 4T 1147 ST 4220 2E/Antepartum 4275 Cath/Hol 2200 Resp 4415 2300 House Supervisor 2400 Biomed 2500 Labor/Delivery 4200 SPU 2100 Dialysis 4492 Security 4071 4250 MRICat Scan 4017 4030 4068 4895 4860
4 Review View Paragraph Help ATT Tell me what you want to do AaBbCcDd AaBbCcDd AaBbC AaBbCct AaB AaBbCcD AaBbCE 1 Normal 1 No Spac... Heading 1 Heading 2 Title Subtitle Subtle En Labor rate variance: 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, Valley 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? 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 favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.) Labor efficiency variance: Document1 - Word Epic W 2N/REH 4285 2W/PED 4375 25/PP 4475 21 4425 3T 4W 4220 26/Antepartum 4275 Styles 2200 Resp 4465 2300 House Supervisor 4200 SPU 2100 Dialysis 4460 Code Blue 4492 Security 4017 4030
Transcribed Image Text:4 Review View Paragraph Help ATT Tell me what you want to do AaBbCcDd AaBbCcDd AaBbC AaBbCct AaB AaBbCcD AaBbCE 1 Normal 1 No Spac... Heading 1 Heading 2 Title Subtitle Subtle En Labor rate variance: 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, Valley 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? 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 favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.) Labor efficiency variance: Document1 - Word Epic W 2N/REH 4285 2W/PED 4375 25/PP 4475 21 4425 3T 4W 4220 26/Antepartum 4275 Styles 2200 Resp 4465 2300 House Supervisor 4200 SPU 2100 Dialysis 4460 Code Blue 4492 Security 4017 4030
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