city hospital_normal and cesarean_Variance analysis

The maternity wing of the city hospital has two types of patients: normal and cesarean. The standard quantities of labor and materials per delivery for 2013 are:

                                                                   Normal      Cesarean

Direct materials (lbs)                               9.0                 21                                                                                    Nursing labor (hrs)                                   2.5                   5

The standard price paid per pound of direct materials is $10. The standard rate for labor is $16. Overhead is applied on the basis of direct labor hours. The variable overhead rate for maternity is $30 per hour, and the fixed overhead rate is $40 per hour.

Actual operating data for 2013 are as follows:

a. Deliveries produced: normal, 4,000; cesarean, 8,000.

b. Direct materials purchased and used: 200,000 pounds at $9.50-35,000 for normal maternity patients and 165,000 for the cesarean patients; no beginning or ending raw material inventories.

c. Nursing labor: 50,700-hours-10,200 hours for normal patients and 40,500 hours for the cesarean; total cost of labor, $580,350.

Required:

1. Prepare a standard cost sheet showing the unit cost per delivery for each type of patient.

Normal Patients:

                                                Standard Price:                 Standard Usage(LBS)      Standard Cost

Direct Materials

Direct Labor

Variable Overhead

Fixed Overhead

Unit Cost

Cesarean  Patients:

                                                Standard Price:                 Standard Usage(LBS)      Standard Cost

Direct Materials

Direct Labor

Variable Overhead

Fixed Overhead

Unit Cost

2. Compute the materials price and usage variances for each type of patient.

MPV-Normal                                     Favorable/Unfavorable

MPV-Cesarean                                 Favorable/Unfavorable

MUV-Normal                                     Favorable/Unfavorable

MUV-Cesarean                                 Favorable/Unfavorable

3. Compute the labor rate and efficiency variances for each type of patient.

LRV-Normal                                        Favorable/Unfavorable

LRV-Cesarean                                    Favorable/Unfavorable

LEV-Normal                                        Favorable/Unfavorable

LEV-Cesarean                                    Favorable/Unfavorable

4. Assume that you know only the total direct materials used for both products and the total direct labor hours used for both products. Can you compute the total materials usage and labor efficiency variances? Explain

MUV=                                                   Favorable/Unfavorable

LEV+                                                      Favorable/Unfavorable