Variance Analysis

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Greenview Hospital operated at 120% of normal capacity in two of its departments during

 

 

 

the year. It operated 120% times 20,000 normal capacity direct labor nursing hours in routine

 

 

 

services and it operated 120% times 20,000 normal capacity equipment hours in the

 

 

 

laboratory. The lab allocates overhead by measuring minutes and hours the equipment is

 

 

 

used; thus equipment hours.

 

 

 

Assumptions:

 

 

 

For Routine Services Nursing:

 

 

 

 

 

• 20,000 hours 120%  24,000 direct labor nursing hours.

 

 

 

• Budgeted Overhead at 24,000 hours  $42,000 fixed plus $6,000 variable  $48,000

 

 

 

 

 

 

 

total.

 

 

 

 

 

• Actual Overhead at 24,000 hours $42,000 fixed plus $7,000 variable $49,000 total.

 

 

 

• Applied Overhead for 24,000 hours at $2.35  $56,400.

 

 

 

 

 

 

 

For Laboratory:

 

 

 

 

 

• 20,000 hours 120%  24,000 equipment hours.

 

 

 

• Budgeted Overhead at 24,000 hours  $59,600 fixed plus $11,400 variable  $71,000

 

 

 

 

 

 

 

total.

 

 

 

 

 

• Actual Overhead at 24,000 hours  $59,600 fixed plus $11,600 variable  $71,200

 

 

 

 

 

 

 

total.

 

 

 

 

 

• Applied Overhead for 24,000 hours at $3.455  $82,920.

 

 

 

 

 

 

 

 

 

 

 

Set up a worksheet for applied overhead costs and volume variance with a column for

 

Routine Services Nursing and a second column for Laboratory.

 

2. Set up a worksheet for actual overhead costs and budget variance with a column for

 

Routine Services Nursing and a second column for Laboratory.

 

3. Set up a worksheet for volume variance and budget variance totaling net variance

 

with a column for Routine Services Nursing and a second column for Laboratory.

 

4. Insert input data from Assumptions.

 

5. Complete computations for all three worksheets

 

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