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John Fleming, chlef 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 hospltals and have resulted in many complaints. Also, because of strict regulations on amounts reimburs Mr. Fleming has asked you to evaluate costs in the hospltal's lab for the past month. The following information is available: a. Two types of tests are performed in the lab-blood tests and smears. During the past month, 850 blood tests and 3,200 smears were performed in the lab. b. Small glass plates are used in both types of tests. During the past month, the hospital purchased 16,000 plates at a cost of $36,480. 2,200 of these plates were unused at the end of the month; no plates were on hand at the beginning of the month. c. During the past month, 2,200 hours of labor time were recorded in the lab at a cost of $23,980. d. The lab's varlable overhead cost last month totaled $17,160. Valley View Hospital has never used standard costs. By searching industry literature, however, you have determined the following nationwide averages for hospital labs: Plates: Three plates are required per lab test. These plates cost $2.40 each and are disposed of after the test is completed. Labor: Each blood test should require 0.8 hours to complete, and each smear should require 0.40 hours to complete. The average cost of this lab time is $11.40 per hour. Overhead: Overhead cost is based on direct labor-hours. The average rate for variable overheod is $7.30 per hour. Required: 1. Compute a materials price variance for the plates purchased last month and a materials quantity variance for the plates used last month. 2. For labor cost in the lab: a. Compute a labor rate variance and a labor efficiency yariance, b. In most hospitals, one-half of the workers in the lab are senior technicions and one-half are assistants, In an effort to reduce costs, Valiey Viow Hospital employs only one-fourth senior technicians and three-fourths ossistants. Would you recommend that this policy be continued? 3-a. Compute the variable overhead tate and efficiency variances. 3.b. Is there any relation between the variable overheod efficiency vartance and the labor efficiency variance

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