A hospital analyzed their patient data in the ICU and categorized patients into two types: short-term and long-term. The standard quantities of labor and materials for each type of patient for 2011 are:
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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A hospital analyzed their patient data in the ICU and categorized patients into two types: short-term and long-term. The standard quantities of labor and materials for each type of patient for 2011 are:
Short term Long term Direct Material (lbs 9 21 Nursing labor (hrs.) 2.5 5 |
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Standard price paid for direct materials (per lb.): |
$ 10.00 |
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Standard rate for labor (per hour): |
$ 16.00 |
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Variable |
$ 30.00 |
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Fixed overhead rate for ICU (per hour): |
$ 40.00 |
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**VOH and FOH are applied (used) on the basis of direct labor hours |
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Actual operating data for 2011 is as follows: |
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Total short-term patients: |
4,000 |
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Total long-term patients: |
8000 |
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Direct materials for short-term patients (in lbs.): |
35,000 |
@ $9.50 |
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Direct materials for long-term patients (in lbs.): |
165,000 |
@ $9.50 |
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Nursing labor for short-term patients (in hours): |
10,200 |
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Nursing labor for long-term patients (in hours): |
40,500 |
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Total nursing labor hours (both types of patients): |
50,700 |
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Total cost of Labor (includes both types of patients): |
$580,350 |
Standard Price Standard Usage Standard Cost
Direct Materials $10 9 $ 90
Direct Labor $16 2.5 $40
Variable overhead $30 2.5 $75
Fixed overhead $40 2.5 $100
Total standard unit cost $305
1. Compute the MUV for the long-term patients and state whether its favorable or not
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