The maternity wing of the city hospital has two types of patients: natural and cesarean. The standard

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The maternity wing of the city hospital has two types of patients: natural and cesarean. The standard quantities of labour and materials per delivery for 2014 are:

Cesarean Natural Direct materials (kilograms) Nursing labour (hours) 21 2.5

The standard price paid per kilogram of direct materials is $10. The standard rate for labour is $16. Overhead is applied on the basis of direct labour hours. The variable overhead rate for maternity is $30 per hour, and the fixed overhead rate is $40 per hour.

Actual operating data for 2014 are as follows:

a. Patient days produced: natural, 4,000; cesarean, 8,000.

b. Direct materials purchased and used: 200,000 kilograms at $9.85-35,000 for natural maternity patients and 165,000 for the cesarean patients; no beginning or ending raw materials inventories.

c. Nursing labour: 50,700 hours-10,200 hours for natural patients and 40,500 hours for the cesarean; total cost of labour, $783,315.


Requirements:

i. Prepare a standard cost sheet showing the unit cost per patient day for each type of patient.

ii. Compute the materials price and usage variances for each type of patient.

iii. Compute the labour rate and efficiency variances.

iv. Assume that you know only the total direct materials used for both procedures and the total direct labour hours used for both procedures. Can you compute the total materials usage and labour efficiency variances? Discuss.


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Cornerstones of Managerial Accounting

ISBN: 978-0176530884

2nd Canadian edition

Authors: Maryanne M. Mowen, Don Hanson, Dan L. Heitger, David McConomy, Jeffrey Pittman

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