Solution 1:
Standard quantity of material for actual test = (750+3000) * 3 = 11250 plates
Actual quantity of material purchased = 15000 plates
Actual quantity of material used = 15000 - 2000 = 13000 plates
Standard price of material = $3.40
Actual price of material = $48,450 / 15000 = $3.23
Material price variance = (SP - AP) * AQ purchased = ($3.40 - $3.23) * 15000 = $2,550 F
Material quantity variance = (SQ - AQ) * SR = (11250 - 13000) * $3.40 = $5,950 U
Solution 2a:
Standard hours of direct labor = 750*0.8 + 3000*0.4 = 1800 hours
Standard rate of direct labor = $11.20 per hour
Actual hours of direct labor = 2000
Actual rate of direct labor = $21,600 / 2000 = $10.80 per hour
Direct labor rate variance = (SR - AR) * AH = ($11.20 - $10.80) * 2000 = $800 F
Direct labor efficiency variance = (SH - AH) * SR = (1800 - 2000) * $11.20 = $2,240 U
Solution 2b:
As a standard, one-half of the workers in the lab are senior technicians and one-half are assistants. However valley view hospital employs only one-fourth senior technicians and three-fourths assistants. This is resulting in favorable direct labor rate variance as direct labor rate per hour is $10.80 from standard rate of $11.20 per hour. However as hospital employs more assistant, it is resulting in to extra time taken by assistant from standard time because they in experienced resulting in unfavorable labor efficiency variance. Unfavorable labor efficiency variance is higher than favorable direct labor rate variance, therefore this policy should be discontinued.
Solution 3a:
Standard hours of direct labor = 750*0.8 + 3000*0.4 = 1800 hours
Standard rate of variable overhead= $7.10 per hour
Actual hours of direct labor = 2000
Actual rate of variable overhead = $15,200 / 2000 = $7.60 per hour
Variable overhead rate variance = (SR - AR) * AH = ($7.10 - $7.60) * 2000 = $1,000 U
Variable overhead efficiency variance = (SH - AH) * SR = (1800 - 2000) * $7.10 = $1,420 U
Solution 3b:
Yes, there is relation between variable overhead efficiency variance and the labor efficiency variance. Variable overhead is based on direct labor hours, therefore if direct labor efficiency variance improves, variable overhead efficiency variance also improve. Both are positively corelated.
John Fleming, chief administrator for Valley View Hospital, is concerned about the costs for tests in...
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...
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...
John Fleming, chief administrator for Valley View Hospital, is concerned about the costs for tests in the hospitals 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...
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...
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...
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...
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 recieved 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...
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...
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...
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...