Fall City Hospital has an outpatient clinic. Melissa Tran, the hospital’s chief administrator, is very concerned about cost control and has asked that performance reports be prepared that compare budgeted and actual amounts for medical assistants, clinic supplies, and lab tests. Past financial studies have shown that the cost of clinic supplies used is driven by the number of medical assistant labor hours worked, whereas lab tests are highly correlated with the number of patients served.

The following information is available for June:
• Medical assistants Fall City’s standard wage rate is $14 per hour, and each assistant is expected to spend 30 minutes with a patient. Assistants totaled 840 hours in helping the 1,580 patients seen, at an average pay rate of $15.50 per hour.
• Clinic supplies The cost of clinic supplies used is budgeted at $12 per labor hour, and the actual cost of supplies used was $9,150.
• Lab tests Each patient is anticipated to have three lab tests, at an average budgeted cost of $65 per test. Actual lab tests for June cost $318,054 and averaged 3.3 per patient.

Required:
1. Prepare a report that shows budgeted and actual costs for the 1,580 patients served during June. Compute the differences (variances) between these amounts and label them as favorable or unfavorable.
2. On the basis of your answer to requirement (1), determine whether Fall City has any significant problems with respect to clinic supplies and lab tests. Briefly discuss your findings.
3. By performing a detailed analysis, determine the spending and efficiency variances for lab tests. Does it appear that Fall City has any significant problems with the cost of its lab tests? Briefly explain. 

4. Compare the lab test variance computed in requirement 1, a flexible-budget variance, with the sum of the variances in requirement 3. Discuss your findings and explain the relationship of flexible budget variances and standard cost variances for variable overhead.