Clearwater Hospital has never used standard costs. By searching industry literature, however, you have determined the...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Clearwater Hospital has never used standard costs. By searching industry literature, however, you have determined the following nationwide averages for hospital labs: Three plates are required per lab test. These plates cost $3.40 each and completed. Each smear should require 0.3 hours to complete, and each blood test should require 0.6 hours to complete. The average cost of this lab time is $12 per hour. Plates: are disposed of after the test is Labour: Overhead: Overhead cost is based direct labour-hours. The average rate of variable overhead is $6 per hour. The on a denominator activity level of 1,250 average rate of fixed overhead is $10 per hour. These rates are based on hours per month. 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. (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 $ 2,992 F $ Materials quantity variance F 34,000 2-a. Compute a labour rate variance and a labour efficiency variance for the lab. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Do not round intermediate calculation and round your final answers to 1 decimal place.) Labour rate variance Labour efficiency variance 3-a. Compute the variable overhead spending and efficiency variances. (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 spending variance Variable overhead efficiency variance Marc Goudreau, administrator of Clearwater Hospital, was puzzled by the prior month's reports. "Every month, it's anyone's guess whether the lab will show a profit or a loss. Perhaps the only answer is to increase our lab fees again." "We can't," replied Rhoda Groves, the controller. "There are still a lot of complaints about the last increase, particularly from the insurance companies and government health units. They're now paying only about 86% of what we bill. I'm beginning to think the problem is on the cost side." To determine if the Clearwater lab costs are in line with those of other hospital labs, Goudreau has asked you to evaluate the costs for the past month. Groves has provided you with the following information: a. Two basic types of tests are performed in the lab-smears and blood tests. During the past month, 2,100 smears and 1,500 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 22,000 plates at a cost of $71,808. This cost is net of a 4% purchase discount. A total of 1,200 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, 1,760 hours of labour time were used in performing smears and blood tests. The cost of this labour time was $18,392.00. d. The lab's variable overhead cost last month totalled $11,000. e. Fixed overhead cost last month totalled $14,000. Clearwater Hospital has never used standard costs. By searching industry literature, however, you have determined the following nationwide averages for hospital labs: Three plates are required per lab test. These plates cost $3.40 each and completed. Each smear should require 0.3 hours to complete, and each blood test should require 0.6 hours to complete. The average cost of this lab time is $12 per hour. Plates: are disposed of after the test is Labour: Overhead: Overhead cost is based direct labour-hours. The average rate of variable overhead is $6 per hour. The on a denominator activity level of 1,250 average rate of fixed overhead is $10 per hour. These rates are based on hours per month. 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. (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 $ 2,992 F $ Materials quantity variance F 34,000 2-a. Compute a labour rate variance and a labour efficiency variance for the lab. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Do not round intermediate calculation and round your final answers to 1 decimal place.) Labour rate variance Labour efficiency variance 3-a. Compute the variable overhead spending and efficiency variances. (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 spending variance Variable overhead efficiency variance Marc Goudreau, administrator of Clearwater Hospital, was puzzled by the prior month's reports. "Every month, it's anyone's guess whether the lab will show a profit or a loss. Perhaps the only answer is to increase our lab fees again." "We can't," replied Rhoda Groves, the controller. "There are still a lot of complaints about the last increase, particularly from the insurance companies and government health units. They're now paying only about 86% of what we bill. I'm beginning to think the problem is on the cost side." To determine if the Clearwater lab costs are in line with those of other hospital labs, Goudreau has asked you to evaluate the costs for the past month. Groves has provided you with the following information: a. Two basic types of tests are performed in the lab-smears and blood tests. During the past month, 2,100 smears and 1,500 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 22,000 plates at a cost of $71,808. This cost is net of a 4% purchase discount. A total of 1,200 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, 1,760 hours of labour time were used in performing smears and blood tests. The cost of this labour time was $18,392.00. d. The lab's variable overhead cost last month totalled $11,000. e. Fixed overhead cost last month totalled $14,000.
Expert Answer:
Related Book For
Fraud examination
ISBN: 978-0538470841
4th edition
Authors: Steve Albrecht, Chad Albrecht, Conan Albrecht, Mark zimbelma
Posted Date:
Students also viewed these accounting questions
-
QUESTION 3 YORK Co. Ltd and HERT Plc, are two companies in the electronic car manufacturing sector. Both companies are listed on a major stock exchange in Asia. At the last meeting of its board of...
-
Success Sdn. Bhd. produces a product, P with the following standard costs and quantities: Raw materials usage per unit 2 kilograms Raw materials cost per kilogram RM5 Labour hours per unit Labour...
-
Overhead is applied to production based on standard labour hours. REQUIRED Find the values of missing information for letters A through R in the columns for Phi and Pho Companies? Phi Company Pho...
-
Transactions related to revenue and cash receipts completed by Acheville Architects Co. during the period September 2-30, 2014, are as follows: Sept. 2. Issued Invoice No. 793 to Nickle Co., $5,200....
-
What are the three common characteristics of an MNE? Identify and briefly describe each.
-
The following is a December 31, 2013, post-closing trial balance for Almway Corporation. Additional Information: 1. The investment account includes an investment in common stock of another...
-
After the positrons were annihilated, the energy density of the universe was dominated by the photons and the neutrinos. Show that the energy density in that era was given by \(u_{\text {total...
-
Notes and Interest Glencoe Inc. operates with a June 30 year-end. During 2010, the following transactions occurred: a. January 1: Signed a one-year, 10% loan for $25,000. Interest and principal are...
-
Is Mongodb more efficient or faster in scaling than NoSQL?
-
Kaplan Computers manufactures high end computer systems for the graphics design industry. At the present time, the company makes three computers with the following characteristics: Computer 1...
-
Imagine a sudden increase in interest rates by a country's central bank. Analyze the immediate effects of this on the bond and stock markets. How would you adapt your investment strategy as an...
-
Compute the child and dependent care credit in each of the following independent cases: a. Jack and Jill Jones are married and file a joint return. Jill worked full time earning $20,000, while Jack...
-
During the following years Adolpho T. (single) had (1) withheld, (2) paid (by check presumably estimated tax payments or paid with the extension) and (3) received a refund of the following amounts...
-
The NBER Business Cycle Dating Committee stated that the U.S. economy entered a recession in December 2007. The S&P/Case-Shiller Home Price Index (a widely used measure of home prices) shows an...
-
Independent random samples from normal populations with the same variance gave the results shown in the following table. Can we conclude that the difference between the means, 1 2 , is less than 5?...
-
The accompanying probability density function is a uniform distribution showing that a certain delicate new medical device will fail between 0 and 10 years after it is implanted in the human body....
-
Estimate GDP in trillions with one decimal point precision Marginal propensity to consume = 0.85 Investment =$5 trillion Government spending except for transfer payment programs = $4 trillion Taxes =...
-
The water in tank A is at 270 F with quality of 10% and mass 1 lbm. It is connected to a piston/cylinder holding constant pressure of 40 psia initially with 1 lbm water at 700 F. The valve is opened,...
-
What is discovery?
-
How are theft investigative methods used to investigate suspected fraud?
-
What is a court-appointed or panel trustee?
-
Based on this chapter and the case incident, compile a list of 10 international HR mistakes Mr. Fisher has made so far.
-
Based on what you read in this chapter of Dessler, Human Resource Management, whats the first step you would have advised the Hotel Paris to take as part of its new safety and health program, and why?
-
Write a one-page summary addressing the topic, How improving safety and health at the Hotel Paris will contribute to us achieving our strategic goals.
Study smarter with the SolutionInn App