The emergency room at Rochester General Hospital uses a flexible budget based on patients seen as the measure of activity. The hospital must maintain an adequate staff of attending and on -call physicians at all times so patient activity does not affect physician scheduling .Nurse scheduling varies as volume changes, however. A standard of .5 nurse - hours per patient visit was set. Hourly pay for nurses ranges from $9 to $18 per hour, and the average pay rate in $15 per hour. The hospital considers all materials to supplies, a part of overhead; there are no direct materials. A statistical study showed the costs of supplies and other variable overhead is more closely associated with nurse-hours than with patient visits. The standard for supplies and other variable overhead is $10 per nurse-hour
The head physician of emergency room unit, Brad Narr, is responsible for control of costs. During October the emergency room unit treated 4,000 patients. The budget actual costs were as follows:
|
|
Budget
|
Actual
|
Variance
|
|
Patient visits
|
3,800
|
4,000
|
200
|
|
Nurse-hours
|
1,900
|
2,080
|
180
|
|
Nursing cost
|
28,500
|
33,180
|
4,680
|
|
Supplies and other variable overhead
|
19,000
|
20,340
|
1,340
|
|
Fixed costs
|
92,600
|
92,600
|
0
|
|
Total costs
|
140,100
|
146,120
|
6,020
|
|
|
|
|
|
1. Calculate price and quality variances for nursing costs
2. Calculate spending and efficiency variances for supplies and other variable overhead
3. The hospital's chief administrator has asked Dr. Narr to explain the variances. Provide possible explanations