Answer 1 | |
Note 1 | Increase in Testing Material Cost is due to the fact that more CMP tests were conducted during 2017 |
and a CMP test requires twice the testing kit , as required in CBC test. Moreover, The cost of testing | |
kit has also gone up from $ 0.20 to $ 0.25 ( increase of 33% ) | |
Note 2 | Direct Labour - Direct Labour has incrased from $ 0.18 per test to $ 0.24 per test ( by increase of 25% ) |
Note 3 | Indirect labour - Two workers eliminated as the new system purchased , resulted into decrease |
in Indirect labour cost . However, the increase in Depreciation is the corresponding impact | |
Note 4 | Utilities and Other variable overheads are corresponding to the increase in the volume from |
2016 to 2017 and are normal | |
Note 5 | Depreciation is doubled due to impact of new machine depreciation , having a useful life of 10 years |
Note 6 | Lab rent is having a fixed rent increase if around 10 % , which is normal |
Others -almost doubled, need to investigate in detail the breakup of others | |
Note 7 | General burden is an allocated cost and it is based on indirect labour rate ,which has decreased and |
despite overall decrease in Indirect labour cost and General overhead, the General burden cost | |
has increased , which needs to be investigated. |
Answer 2 | |
Lab manager has not performed well , which is clear in following words | |
1) The Lab Manager has shown poor control over the consumption of Test Kit , which has consumed | |
around 34% higher than standards in year 2016 , while 13% higher in 2017 | |
2) Increase in Utilities and Others - is also to be questioned, it has been more than corresponding increase in work | |
3) General burden expenses have increased , while it should have come down as the corresponding expenditure | |
on General overhead and other indirect expenses has decreased, which shows poor control | |
4) It seems that night shift working has been done and during night shift there was mismanagement in | |
consumption of testing kit , wastage of utilities and others. |
Workings
Blood testing facility | |||||
2016 | 2017 | variance | |||
$ | $ | ||||
Testing Materials | 29000 | 34000 | 5000 | Note 1 | |
Direct Labor | 455000 | 609000 | 154000 | Note 2 | |
Lab overhead | 0 | ||||
Variable | 0 | ||||
Indirect Labor | 39500 | 10500 | -29000 | Note 3 | |
Utilities | 32720 | 36295 | 3575 | Note 4 | |
Other | 12520 | 16695 | 4175 | Note 4 | |
Fixed | 0 | ||||
Supervision | 40000 | 40000 | 0 | ||
Depreciation | 25000 | 50000 | 25000 | Note 5 | |
Lab rent | 72000 | 78000 | 6000 | Note 6 | |
Other | 8460 | 14900 | 6440 | Note 6 | |
General burden | 73700 | 84500 | 10800 | Note 7 | |
Total | 787900 | 973890 | 185990 |
Overall Cost working | ||||||
2016 | 2017 | 2016 | 2017 | Increase / decrease | ||
Qty | Qty | Amount | Amount | |||
CBC tests | 28000 | 40000 | 0 | |||
CMP tests | 40000 | 40000 | 0 | |||
Testing kits consumed | CBC Tests | 28000 | 40000 | 0 | ||
CMP Tests | 80000 | 80000 | 0 | |||
should be consumed | 108000 | 120000 | 0 | 0 | 0 | |
Actual consumed | 145000 | 136000 | 0 | |||
Cost / kit | 0.2 | 0.25 | 0 | |||
Testing material cost | 29000 | 34000 | 5000 | |||
Cost per test | 0.18 | 0.24 | 0 | |||
Cost of testing | 26100 | 32640 | 6540 | |||
Direct labour | 4 CBC / hour | 0 | ||||
2 CBC / hour | 0 | |||||
hourly rate / hour | 16 | 20 | 448000 | 608000 | 160000 | |
Night shift | 17.6 | 22 | 0 | |||
Hours paid | 28000 | 30400 | 0 | |||
General Overhead | 888600 | 836500 | -52100 | |||
Indirect labour cost | 950000 | 500000 | -450000 | |||
Fixed overhead | 135000 | 180000 | 45000 | |||
Variable factory overhead | 2.50/ hr | 2/hr | 70000 | 60800 | -9200 | |
Depreciation | 0 | |||||
Total | 2546700 | 2251940 | -294760 |
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