80.2K

Verified Solution

Link Copied!

Marc Goudreau, administrator of Clearwater Hospital, was puzzled by the prior month's reports. "Every month, it's anyone's guess whether the lab will show a profit or a loss. Perhaps the only answer is to increase our lab fees again." "We can't," replied Rhoda Groves, the controller. "There are still a lot of complaints about the last increase, particularly from the insurance companies and government health units. They're now paying only about 80% of what we bil. Im beginning to think the problem is on the cost side." To determine if the Clearwater lab costs are in line with those of other hospital labs, Goudreau has asked you to evaluate the costs for the past month, Groves has provided you with the following information: a. Two basic types of tests are performed in the lab-smears and blood tests. During the past month, 2,700 smears and 1,200 blood tests were performed in the lab. b. Small glass plates are used in both types of tests. During the past month, the hospital purchased 12,000 plates at a cost of $20,952. This cost is net of a 3% purchase discount. A total of 1,200 of these plates were unused at the end of the months no plates were on hand at the beginning of the month. c. During the past month, 1,600 hours of labour time were used in performing smears and biood tests. The cost of this labour time was $13,120,00 d. The lab's variable overhead cost last month totalled $5,200. e. Fixed overhead cost last month totalled $9,050. Clearwater Hospital has never used standard costs. By searching industry literature, however, you have determined the following nationwide averages for hospital labs: Platest three plates are required per lab test. These plates cost 11 . 30 each and are disposed of atter the test is cospleted. tabourt Each inear should require 0.3 hours to complete. Asd each blood tent nhould require 0.6 hoors to complate. The average cont of this lab tian in $10 per hour. Overheadroverhesd cont is based on direct labour-bours. The average rate of varilable overhesd is 13 per bour. The average rate of fixed overbesd in $6 per beur. These rates are based on a dencinater activity level of 1,500 hours per month. Required: 1. Compute the materiols price variance for the plates purchased last month, and compute a materials quantity variance for the plates used last month. (Indicate the effect of each variance by selecting "F" for favorable, " U " for unfavorable, and "None" for no effect (i.e., zero variance)-) (x) Answer is complete but not entirely correct. 2-a. Compute a labour rate variance and a labour efficiency variance for the lab. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Do not round intermediate calculation and round your final answers to 1 decimal place.) (8) Answer is complete but not entirely correct. 2-b. This part of the question is not part of your Connect assignment. 3-a. Compute the variable overhead spending and efficiency variances. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).) Answer is complete but not entirely correct. 3.b. This part of the question is not part of your Connect assignment. 4. Compute the fixed overhead budget and volume variances. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).)

Answer & Explanation Solved by verified expert

See Answer