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Jacqui Bassett, chief administrator for the city hospital, is concerned about costs for tests in the hospital's lab. Bassett has asked you o evaluate costs for the past month. The following information is available: a. Basically, two types of tests are performed in the lab: blood tests and smears. During the past month, 3,600 blood tests and 4,800 smears were performed in the lab. . Small glass plates are used in both types of tests. During the past month, the hospital purchased 24,000 plates at a cost of $58,800. This cost is net of a 6% quantity discount. 2,400 of these plates were still on hand unused at the end of the month; there were no plates on hand at the beginning of the month. c. During the past month, 2,150 hours of labour time were recorded in the lab. The cost of this labour time was $26,230. d. Variable overhead cost last month in the lab for utilities and supplies totalled $15,050. The hospital has never used standard costs. By searching industry literature, however, you have determined the following nationwide averages for hospital labs:

Jacqui Bassett, chief administrator for the city hospital, is concerned about costs for tests in the hospital's lab. Bassett has asked you o evaluate costs for the past month. The following information is available: a. Basically, two types of tests are performed in the lab: blood tests and smears. During the past month, 3,600 blood tests and 4,800 smears were performed in the lab. . Small glass plates are used in both types of tests. During the past month, the hospital purchased 24,000 plates at a cost of $58,800. This cost is net of a 6% quantity discount. 2,400 of these plates were still on hand unused at the end of the month; there were no plates on hand at the beginning of the month. c. During the past month, 2,150 hours of labour time were recorded in the lab. The cost of this labour time was $26,230. d. Variable overhead cost last month in the lab for utilities and supplies totalled $15,050. The hospital has never used standard costs. By searching industry literature, however, you have determined the following nationwide averages for hospital labs:

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Jacqui Bassett, chief administrator for the city hospital, is concerned about costs for tests in the hospital's lab. Bassett has asked you to evaluate costs for the past month. The following information is available: a. Basically, two types of tests are performed in the lab: blood tests and smears. During the past month, 3,600 blood tests and 4,800 smears were performed in the lab. b. Small glass plates are used in both types of tests. During the past month, the hospital purchased 24,000 plates at a cost of $58,800. This cost is net of a 6% quantity discount. 2,400 of these plates were still on hand unused at the end of the month; there were no plates on hand at the beginning of the month. c. During the past month, 2,150 hours of labour time were recorded in the lab. The cost of this labour time was $26,230. d. Variable overhead cost last month in the lab for utilities and supplies totalled $15,050. The hospital has never used standard costs. By searching industry literature, however, you have determined the following nationwide averages for hospital labs: Plates: Two plates are required per lab test. These plates cost $2.60 each and are disposed of after the test is completed. Labour: Each blood test should require 0.30 hour to complete, and each smear should require 0.15 hour to complete. The average cost of this lab time is $14.00 per hour. Overhead: Overhead cost is based on direct labour-hours. The average rate for variable overhead is $5.80 per hour. Bassett would like a complete analysis of the cost of plates, labour and overhead in the lab for the last month so that she can get to the root of the lab's cost problem. Required: 1. Compute a materials price variance for the plates purchased last month and a materials quantity variance for the plates used last month. (Indicate the effect of each variance by selecting "F" for favourable, "U" for unfavourable, and "None" for no effect (i.e., zero variance).) Materials price variance Materials quantity variance
Transcribed Image Text:Jacqui Bassett, chief administrator for the city hospital, is concerned about costs for tests in the hospital's lab. Bassett has asked you to evaluate costs for the past month. The following information is available: a. Basically, two types of tests are performed in the lab: blood tests and smears. During the past month, 3,600 blood tests and 4,800 smears were performed in the lab. b. Small glass plates are used in both types of tests. During the past month, the hospital purchased 24,000 plates at a cost of $58,800. This cost is net of a 6% quantity discount. 2,400 of these plates were still on hand unused at the end of the month; there were no plates on hand at the beginning of the month. c. During the past month, 2,150 hours of labour time were recorded in the lab. The cost of this labour time was $26,230. d. Variable overhead cost last month in the lab for utilities and supplies totalled $15,050. The hospital has never used standard costs. By searching industry literature, however, you have determined the following nationwide averages for hospital labs: Plates: Two plates are required per lab test. These plates cost $2.60 each and are disposed of after the test is completed. Labour: Each blood test should require 0.30 hour to complete, and each smear should require 0.15 hour to complete. The average cost of this lab time is $14.00 per hour. Overhead: Overhead cost is based on direct labour-hours. The average rate for variable overhead is $5.80 per hour. Bassett would like a complete analysis of the cost of plates, labour and overhead in the lab for the last month so that she can get to the root of the lab's cost problem. Required: 1. Compute a materials price variance for the plates purchased last month and a materials quantity variance for the plates used last month. (Indicate the effect of each variance by selecting "F" for favourable, "U" for unfavourable, and "None" for no effect (i.e., zero variance).) Materials price variance Materials quantity variance
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