John Fleming, chief administrator for Valley View Hospital, is concerned about the costs for tests in the hospital's lab. Charges for labtests are consistently higher at Valley View than other hospitals and have resulted in many complaints. Also, because of strictregulations on amounts reimbursed for lab tests, payments received from insurance companies and governmental units have not beenhigh enough to cover lab costs.Mr. Fleming 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, 900 blood tests and 3,300 smearswere performed in the lab.b. Small glass plates are used in both types of tests. During the past month, the hospital purchased 16,500 plates at a cost of $35,640.2,300 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, 2,300 hours of labor time were recorded in the lab at a cost of $25,185.d. The lab's variable overhead cost last month totaled $18,170.Valley View Hospital has never used standard costs. By searching industry literature, however, you determined the followingnationwide averages for hospital labs:Plates: Three plates are required per lab test. These plates cost $2.25 each and are disposed of after the test is completed.Labor: Each blood test should require 0.6 hour to complete, and each smear should require 0.30 hour to complete. The average costof this lab time is $11.50 per hour.Overhead: Overhead cost is based on direct labor-hours. The average rate for variable overhead is $7.40 per hour.Required:1. Compute a materials price variance for the plates purchased last month and a materials quantity variance for the plates used lastmonth.2. 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 this policy becontinued?3-a. Compute the variable overhead rate and efficiency variances.3-b. Is there any relation between the variable overhead efficiency variance and the labor efficiency variance?

Name: John Fleming, chief administrator for Valley View Hospital, is concer
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Description: John Fleming, chief administrator for Valley View Hospital, is concerned about the costs for tests in the hospital's lab. Charges for labtests are consistently higher at Valley View than other hospitals and have resulted in many complaints. Also, be

Materials variance results whenever there is a difference between the actual cost incurred for…

Answered: 1. Compute a materials price variance…

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Accounting

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

FINANCIAL ACCOUNTING

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ISBN:9781259964947

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Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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Concept explainers

Variance Analysis

In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.

Standard Costing

The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.

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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 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 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, 900 blood tests and 3,300 smears
were performed in the lab.
b. Small glass plates are used in both types of tests. During the past month, the hospital purchased 16,500 plates at a cost of $35,640.
2,300 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, 2,300 hours of labor time were recorded in the lab at a cost of $25,185.
d. The lab's variable overhead cost last month totaled $18,170.
Valley View Hospital has never used standard costs. By searching industry literature, however, you determined the following
nationwide averages for hospital labs:
Plates: Three plates are required per lab test. These plates cost $2.25 each and are disposed of after the test is completed.
Labor: Each blood test should require 0.6 hour to complete, and each smear should require 0.30 hour to complete. The average cost
of this lab time is $11.50 per hour.
Overhead: Overhead cost is based on direct labor-hours. The average rate for variable overhead is $7.40 per hour.
Required:
1. Compute a materials price variance for the plates purchased last month and a materials quantity variance for the plates used last
month.
2. 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 this policy be
continued?
3-a. Compute the variable overhead rate and efficiency variances.
3-b. Is there any relation between the variable overhead efficiency variance and the labor efficiency variance?

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Step 1: Definition of materials variance:

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Step 3: Requirement 1- Calculation of materials price variance and quantity variance-

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Step 4: Requirement 2- Computation of labor rate variance and efficiency variance along with recommendation:

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Record the overhead costs, including the unfavorable volume and unfavorable controllable variances. same way as the chart above Record the direct labor costs, including the favorable efficiency variance and unfavorable rate variance. same way as the chart above
I. Krueger Corporation in Washington, D.C., U.S., recently implemented a standard cost system. The company's cost accountant has gathered the following information needed to perform a variance analysis at the end of the month: Standard Cost Information Direct materials.... Quantity allowed per unit . Direct labor rate..... Hours allowed per unit .. Fixed overhead budgeted . Normal level of production .. Variable overhead application rate . Fixed overhead application rate ($12,000 _ 1,200 units)... 10.00 per unit Total overhead application rate.. $5 per pound .100 pounds per unit $20.00 per hour 2 hours per unit $12,000 per month . 1,200 units $ 2.00 per unit $12.00 per unit Actual Cost Information Cost of materials purchased and used ... Pounds of materials purchased and used . Cost of direct labor .... $468,000 .104,000 pounds $46,480 2,240 hours Hours of direct labor.. arre$2,352 .$12,850 Cost of variable overhead . Cost of fixed overhead . Volume of production ..1,000 units…
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Use this information to answer the question that follow.The following data relate to direct materials costs for February:Materials cost per yard: standard, $1.96; actual, $2.03Standard yards per unit: standard, 4.73 yards; actual, 5.21 yardsUnits of production: 9,100Calculate the direct materials price variance.
Krueger Corporation in Washington, D.C., U.S., recently implemented a standard cost system. The company’s cost accountant has gathered the following information needed to perform a variance analysis at the end of the month: Standard Cost Information Direct materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $5 per pound Quantity allowed per unit . . . . . . . . . . . . . . . . . . . . . . . . . . . . .100 pounds per unit Direct labor rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $20.00 per hour Hours allowed per unit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 hours per unit Fixed overhead budgeted . . . . . . . . . . . . . . . . . . . . . . . . $12,000 per month Normal level of production . . . . . . . . . . . . . . . . . . . . . . . . . . 1,200 units Variable overhead application rate . . . . . . . . . . . . . . . . . . . $ 2.00 per unit Fixed overhead application rate ($12,000 _ 1,200 units) . . . 10.00…
please answer all requirements or skip/leave answer with must must explanation , computation for each parts and steps clearly and completely answer in text form remember attempt if answer all or skip
Subject: acounting
A manufacturing company reports the following for one of its products. Compute the direct materials (a) price variance and (b) quantity variance and classify each as favorable or unfavorable.