Valley View Hospital has an outpatient clinic. Jeffrey Harper, the hospital?s ch

Question

Valley View Hospital has an outpatient clinic. Jeffrey Harper, the hospital?s chief administrator, is very concerned about cost control and has asked that performance reports be prepared that compare budgeted and actual amounts for medical assistants, clinic supplies, and lab tests. Past financial studies have shown that the cost of clinic supplies used is driven by the number of medical assistant labor hours worked, whereas lab tests are highly correlated with the number of patients served. The following information is available for June: Lab tests: Actual lab tests for June cost $329,406 and averaged 3.3 per patient. Each patient is anticipated to have three lab tests, at an average budgeted cost of $66 per test. Medical assistants: Valley View?s standard wage rate is $17 per hour, and each assistant is expected to spend 30 minutes with a patient. Assistants totaled 860 hours in helping the 1,610 patients seen, at an average pay rate of $17.50 per hour. Clinic supplies: The cost of clinic supplies used is budgeted at $13 per labor hour, and the actual cost of supplies used was $10,050. Required: 1. Prepare a report that shows budgeted and actual costs for the 1,610 patients served during June. Compute the differences (variances) between these amounts and label them as favorable or unfavorable. (Indicate the effect of each variance by selecting ''Favorable'' or ''Unfavorable''. Select ''None'' and enter ''0'' for no effect (i.e., zero variance). Do not round intermediate calculations.)

Explanation / Answer

Budget Actual 1610 patients Patients Variance Medical assistants (.5 hours*1610)*17 = 13685 860*17.5 = 15050 1365(U)   [15050-13685] clinic supplies (.5*1610)*13 = 10465 10050 -415 (F)    [10050-10465] Lab tests (1610*3*66] =318780 329406 10626 (U)    [329406 -318780] Total 342930 354506 11576 (U)

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