Requirement 1: Compute a materials price variance for the plates purchased last

month and a materials quantity variance for the plates used last month.

Material Price Variance = (AP-SP) x AQ

Given:
Actual Quantity 12,000.00
Actual Price 2.35
Standard Price 2.50

Solution:
AP 2.35
SP 2.50
Diff. (0.15)
AQ 12,000.00
Materials Price Variance (1,800.00) FAVORABLE

Material Qty Variance = (AQ-SQ) x SP

Given:
Actual Quantity 10,500.00 *12,000-1,500 on hand
Standard Quantity 8,400.00 *{1,800 (Blood test) + 2,400 (Smears)} x
Standard Price 2.50

Solution:
AQ 10,500.00
SQ 8,400.00
Diff. 2,100.00
SP 2.50
Materials Qty Variance 5,250.00 UNFAVORABLE

Requirement 2:
For labor cost in the lab:
a.       Compute a labor rate variance and a labor efficiency variance.
b.       In most hospitals, one-half of the workers in the lab are senior technicians and one-half are assistants.
In an effort to reduce costs, Valley View Hospital employs only one-fourth senior technicians and three-fo
Would you recommend that this policy be continued? Explain.

A. Labor Rate Variance = (AR-SR) x AH

Given:
Actual Hour 1,150.00
Actual Rate 12.00
Standard Rate 14.00
 Solution:
AR 12.00
SR 14.00
Diff. (2.00)
AH 1,150.00
Labor Rate Variance (2,300.00) FAVORABLE

A. Labor Efficiency Variance = (AH-SH) x SR

Given:
Standard Rate 14.00
Actual Hour 1,150.00
Standard Hour 900.00 *1,800 x 0.3 (Blood test) + 2,400 x 0.15 (

Solution:
AH 1,150.00
SH 900.00
Diff. 250.00
SR 14.00
Labor Efficiency Variance 3,500.00 UNFAVORABLE

B. Continuation of the policy is not recommended. Although the hospital was able to save from
labor rate which is evident with our computation of the labor rate variance, the effect of
inefficiency is much more damaging and the savings from rate variance cannot suffice the
effect of inefficiency which is also showed and very evident with our computations of
materials quantity variance and labor efficiency variance, as both being unfavorable. With this
we can conclude, that since assisstant technicians are the ones handling most of the tests,
there are materials wasted as well as the time consumed in doing a test is higher than the
standard time a test should be done. Efficiency should be considered here and one thing to
ensure efficiency is to hire competent and efficient technicians.

Requirement 3: Compute the variable overhead spending and efficiency variance.

VOH Spending Variance = AVOH - (VOH Rate x AQ)

Given:
Actual Quantity 1,150.00 *based on direct labor hours
Actual VOH 7,820.00
VOH Rate 6.00

Solution:
Actual VOH 7,820.00
AQ x VOH Rate 6,900.00
VOH Spending Variance 920.00 UNFAVORABLE
VOH Efficiency Variance = (AH-SH) x VOH Rate

Given:
Actual Hour 1,150.00
Standard Hour 900.00
VOH Rate 6.00

Solution:
VOH Rate x AQ 6,900.00
VOH Rate x SQ 5,400.00
VOH Efficiency Variance 1,500.00 UNFAVORABLE
500 on hand
lood test) + 2,400 (Smears)} x 2

ans and one-half are assistants.

senior technicians and three-fourths assistants.
3 (Blood test) + 2,400 x 0.15 (Smears)

able to save from

he effect of
not suffice the

avorable. With this

t of the tests,
gher than the
nd one thing to

direct labor hours

Requirement 1. Compute the direct materials spending and efficiency variances for the year.

Material Price Variance = (AP-SP) x AQ

Given:
Actual Quantity 64,000.00
Actual Price 8.55
Standard Price 8.45

Solution:
AP 8.55
SP 8.45
Diff. 0.10
AQ 64,000.00
Materials Price Variance 6,400.00 UNFAVORABLE

Material Qty Variance = (AQ-SQ) x SP

Given:
Actual Quantity 64,000.00
Standard Quantity 60,000.00
Standard Price 8.45

Solution:
AQ 64,000.00
SQ 60,000.00
Diff. 4,000.00
SP 8.45
Materials Qty Variance 33,800.00 UNFAVORABLE

Requirement 2. Compute the direct labor spending and efficiency variances for the year.

Labor Rate Variance = (AR-SR) x AH

Given:
Actual Hour 45,000.00
Actual Rate 7.80
Standard Rate 8.00

Solution:
AR 7.80
SR 8.00
Diff. (0.20)
AH 45,000.00
Labor Rate Variance (9,000.00) FAVORABLE
 Labor Efficiency Variance = (AH-SH) x SH

Given:
Standard Rate 8.00
Actual Hour 45,000.00
Standard Hour 42,000.00

Solution:
AH 45,000.00
SH 42,000.00
Diff. 3,000.00
SR 8.00
Labor Efficiency Variance 24,000.00 UNFAVORABLE

Requirement 3. For the manufacturing overhead, compute:

a. The variable overhead spending and efficiency variances for the year.
b. The fixed overhead budget and volume variances for the year.

A. VOH Spending Variance = AVOH - (VOH Rate x AQ)

Given:
Actual Quantity 45,000.00 *based on direct labor hours
Actual VOH 108,000.00
VOH Rate 2.50

Solution:
Actual VOH 108,000.00
AQ x VOH Rate 112,500.00
VOH Spending Variance (4,500.00) FAVORABLE

A. VOH Efficiency Variance = (AH-SH) x VOH Rate

Given:
Actual Hour 45,000.00 *based on direct labor hours
Standard Hour 42,000.00
VOH Rate 2.50

Solution:
VOH Rate x AQ 112,500.00
VOH Rate x SQ 105,000.00
VOH Efficiency Variance 7,500.00 UNFAVORABLE

B. FOH Spending Variance = AFOH - BFOH

 Given:
Actual FOH 211,800.00
Budgeted FOH 210,000.00

Solution:
Actual FOH 211,800.00
Budgeted FOH 210,000.00
FOH Spending Variance 1,800.00 UNFAVORABLE

B. FOH Volume Variance = BFOH - (FOH Rate x SH)

Given:
Budgeted FOH 210,000.00
FOH Rate 6.00
Standard Hour 42,000.00

Budgeted FOH 210,000.00

(FOH Rate x SH 252,000.00
FOH Volume Variance (42,000.00) FAVORABLE

Requirement 3. Total the variances you have computed, and compare the net amount with the P18,000 mentioned by t
Do you agree that bonuses should be given to everyone for good cost control during the year. Explain.

Materials Price Variance 6,400.00

Materials Qty Variance 33,800.00
Labor Rate Variance (9,000.00)
Labor Efficiency Variance 24,000.00
VOH Spending Variance (4,500.00)
VOH Efficiency Variance 7,500.00
FOH Spending Variance 1,800.00
FOH Volume Variance (42,000.00)
Total Variance 18,000.00

Yes, I agree. Total variance of 18,000 is exactly the same amount the President has announced. With this, bo
really be given to the employees for job well done in the effective cost control done for the year.
with the P18,000 mentioned by the president.
rol during the year. Explain.

ident has announced. With this, bonuses should

ntrol done for the year.