Valley View Hospital chief executive John Fleming is concerned about the cost of tests in the hospital's
Question:
Valley View Hospital chief executive John Fleming is concerned about the cost of tests in the hospital's lab. Fees for lab tests are consistently higher in Valley View than at other hospitals, resulting in many complaints. In addition, due to strict regulations regarding reimbursement for laboratory tests, payments from insurance companies and government agencies have not been high enough to cover laboratory costs. Mr. Fleming asked you last month to assess the costs in the hospital's laboratory. The following information is available: a. Two types of tests are done in the laboratory: blood tests and smears. Last month, 1,300 blood tests and 4,000 smears were performed in the lab. B. Both types of tests use small glass plates. Last month, the hospital purchased 20,000 plates for $79,800. At the end of the month, 3,000 of these plates were unused; At the beginning of the month, there was no plate on hand. A. Last month, 3,000 hours of work were recorded at the lab costing $33,900. D. Last month, the lab's variable overhead cost was $25,800. Valley View Hospital has never used standard costs. However, by researching the industry literature, you determined the following nationwide averages for hospital labs: Plates: Three plates are required per lab test. These plates cost $4.20 each and are discarded after testing is complete. Labor: Each blood test should take 0.8 hours to complete and each smear should take 0.40 hours to complete. The average cost of this lab time is $12.20 per hour. Overhead: The overhead cost is directly related to labor hours.
1. Calculate a material price difference for plates purchased last month and a material quantity difference for plates used last month.
2. For labor cost in the laboratory: a. Calculate a labor rate variance and a labor productivity variance
3. variable overhead rate and productivity variances.
Managerial Accounting
ISBN: 978-0077522940
15th edition
Authors: Ray Garrison, Eric Noreen, Peter Brewer