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: Two types of tests are performed in the lab-blood tests and smears. During the past month, 1,500 blood tests and 4,400 smears were performed in the lab. Small glass plates are used in both types of tests. During the past month, the hospital purchased 22,000 plates at a cost of $52,800. 3,400 of these plates were unused at the end of the month; no plates were on hand at the beginning of the month. During the past month, 3,400 hours of labor time were recorded in the lab at a cost of $39,100. The lab's variable overhead cost last month totaled $30,600. 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 $2.50 each and are disposed of after the test is completed. Labor: Each blood test should require 0.8 hours to complete, and each smear should require 0.40 hours to complete. The average cost of this lab time is $12.60 per hour. Overhead: Overhead cost is based on direct labor-hours. The average rate for variable overhead is $8.50 per hour. 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:
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: Two types of tests are performed in the lab-blood tests and smears. During the past month, 1,500 blood tests and 4,400 smears were performed in the lab. Small glass plates are used in both types of tests. During the past month, the hospital purchased 22,000 plates at a cost of $52,800. 3,400 of these plates were unused at the end of the month; no plates were on hand at the beginning of the month. During the past month, 3,400 hours of labor time were recorded in the lab at a cost of $39,100. The lab's variable overhead cost last month totaled $30,600. 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 $2.50 each and are disposed of after the test is completed. Labor: Each blood test should require 0.8 hours to complete, and each smear should require 0.40 hours to complete. The average cost of this lab time is $12.60 per hour. Overhead: Overhead cost is based on direct labor-hours. The average rate for variable overhead is $8.50 per hour. 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:
Chapter1: Financial Statements And Business Decisions
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![Paragraph
5
1 Normal 1 No Spac... Heading 1 Heading 2
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:
Two types of tests are performed in the lab-blood tests and smears. During the past month, 1,500
blood tests and 4,400 smears were performed in the lab.
Small glass plates are used in both types of tests. During the past month, the hospital purchased 22,000
plates at a cost of $52,800. 3,400 of these plates were unused at the end of the month; no plates were
on hand at the beginning of the month.
During the past month, 3,400 hours of labor time were recorded in the lab at a cost of $39,100.
The lab's variable overhead cost last month totaled $30,600.
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 $2.50 each and are disposed of after the
test is completed.
2. For labor cost in the lab:
Title
Labor: Each blood test should require 0.8 hours to complete, and each smear should require 0.40 hours
to complete. The average cost of this lab time is $12.60 per hour.
Overhead: Overhead cost is based on direct labor-hours. The average rate for variable overhead is $8.50
per hour.
Epic
AaBbCcD AaBbCcD
Subtitle Subtle Em....
1. Compute a materials price variance for the plates purchased last month and a materials quantity
variance for the plates used last month.
W]
2N/REH
Styles
4W
SW
4285 2W/PED
4375 25/PP
4475 21
4425 3T
4575 4T
1147 ST
4220 2E/Antepartum
4275 Cath/Hol
2200 Resp 4415
2300 House Supervisor
2400 Biomed
2500 Labor/Delivery
4200 SPU
2100 Dialysis
4492 Security
4071
4250 MRICat Scan
4017
4030
4068
4895 4860](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fcb34dea0-28f5-4914-972f-0e64e2a4cf57%2F07a692f4-9ea3-43c6-b542-a4f75b33a3af%2Fzgsukx_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Paragraph
5
1 Normal 1 No Spac... Heading 1 Heading 2
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:
Two types of tests are performed in the lab-blood tests and smears. During the past month, 1,500
blood tests and 4,400 smears were performed in the lab.
Small glass plates are used in both types of tests. During the past month, the hospital purchased 22,000
plates at a cost of $52,800. 3,400 of these plates were unused at the end of the month; no plates were
on hand at the beginning of the month.
During the past month, 3,400 hours of labor time were recorded in the lab at a cost of $39,100.
The lab's variable overhead cost last month totaled $30,600.
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 $2.50 each and are disposed of after the
test is completed.
2. For labor cost in the lab:
Title
Labor: Each blood test should require 0.8 hours to complete, and each smear should require 0.40 hours
to complete. The average cost of this lab time is $12.60 per hour.
Overhead: Overhead cost is based on direct labor-hours. The average rate for variable overhead is $8.50
per hour.
Epic
AaBbCcD AaBbCcD
Subtitle Subtle Em....
1. Compute a materials price variance for the plates purchased last month and a materials quantity
variance for the plates used last month.
W]
2N/REH
Styles
4W
SW
4285 2W/PED
4375 25/PP
4475 21
4425 3T
4575 4T
1147 ST
4220 2E/Antepartum
4275 Cath/Hol
2200 Resp 4415
2300 House Supervisor
2400 Biomed
2500 Labor/Delivery
4200 SPU
2100 Dialysis
4492 Security
4071
4250 MRICat Scan
4017
4030
4068
4895 4860
Transcribed Image Text:4
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View
Paragraph
Help
ATT
Tell me what you want to do
AaBbCcDd AaBbCcDd AaBbC AaBbCct AaB AaBbCcD AaBbCE
1 Normal 1 No Spac... Heading 1
Heading 2
Title
Subtitle Subtle En
Labor rate variance:
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?
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?
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.)
Labor efficiency variance:
Document1 - Word
Epic
W
2N/REH 4285 2W/PED
4375 25/PP
4475 21
4425 3T
4W
4220 26/Antepartum
4275
Styles
2200 Resp 4465
2300 House Supervisor
4200 SPU
2100 Dialysis
4460 Code Blue
4492 Security
4017
4030
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