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Problem $10-12($Algo$)$ Variance Analysis in a Hospital $[$LO$10-1,$ LO$10-2,$ LO$10-3]$

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.$)$ Complete this question by entering your answers in the tabs below.

Req $2$ A

Req $2$B

Req$3A$

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?

Yes

NoComplete this question by entering your answers in the tabs below.

Req$2B$

Keq $3$ A

Req$3B$

Compute the variable overhead rate 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$).$ Input all amounts as positive values.$)$

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:

a$.$ Two types of tests are performed in the lab$-$blood tests and smears. During the past month, $1,250$ blood tests and $3,900$ smears

were performed in the lab.

b$.$ Small glass plates are used in both types of tests. During the past month, the hospital purchased $19,500$ plates at a cost of $$73,320.$

$2,900$ 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, $2,900$ hours of labor time were recorded in the lab at a cost of $$32,625.$

d$.$ The lab's variable overhead cost last month totaled $$24,650.$

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 $$4\mathrm{.}00$ each and are disposed of after the test is completed.

Labor: Each blood test should require $0\mathrm{.}8$ hours to complete, and each smear should require $0\mathrm{.}40$ hours to complete. The average

cost of this lab time is $$12\mathrm{.}10$ per hour.

Overhead: Overhead cost is based on direct labor$-$hours. The average rate for variable overhead is $$8\mathrm{.}00$ per hour.

Required:

Compute a materials price variance for the plates purchased last month and a materials quantity variance for the plates used last

month.

For labor cost in the lab:

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?

Complete this question by entering your answers in the tabs below.