accounting variances 401967

Two basic types of tests are performed in the lab”smears and blood tests. During the past month, 2,400 smears and 400 blood tests were performed in the lab.

Small glass plates are used in both types of tests. During the past month, the hospital purchased 12,000 plates at a cost of $37,440. This cost is net of a 4% purchase discount. A total of 1,400 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, 1,400 hours of labor time were used in performing smears and blood tests. The cost of this labor time was $14,700.

Cottonwood Hospital has never used standard costs. By searching industry literature, however, you have determined the following nationwide averages for hospital labs:

Three plates are required per lab test. These plates cost $3.25 each and are disposed of after the test is completed.

Each smear should require 0.20 hours to complete, and each blood test should require 0.40 hours to complete. The average cost of this lab time is $11.40 per hour.

Overhead cost is based on direct labor hours. The average rate of variable overhead is $6.50 per hour.

Compute the materials price variance for the plates purchased last month, and compute a materials quantity variance for the plates used last month. (Input all amounts as positive values. Leave no cells blank be certain to enter “0” wherever required. Indicate the effect of each variance by selecting “F” for favorable, “U” for unfavorable, and “None” for no effect (i.e., zero variance.)

Compute a labor rate variance and a labor efficiency variance. (Input all amounts as positive values. Leave no cells blank be certain to enter “0” wherever required. Indicate the effect of each variance by selecting “F” for favorable, “U” for unfavorable, and “None” for no effect (i.e., zero variance.)

In most hospitals, three fourths of the workers in the lab are certified technicians and one fourth are assistants. In an effort to reduce costs, Cottonwood Hospital employs only one half certified technicians and one half assistants. Would you recommend that this policy be continued?

Compute the variable overhead rate and efficiency variances. (Input all amounts as positive values. Leave no cells blank be certain to enter “0” wherever required. Indicate the effect of each variance by selecting “F” for favorable, “U” for unfavorable, and “None” for no effect (i.e., zero variance.)

Is there any relation between the variable overhead efficiency variance and the labor efficiency variance?