Kamis, September 15, 2016

Akmen task



INTEGRATIVE EXERCISE (CHAPTERS 5-10)

The Two Cost Systems
Sacred Heart Hospital (SHH) faces skyrocketing nursing costs, all which relate to its two biggest nursing service lines – the Emergency Room (ER) and the Operating Room (OR). SHH’s current cost system assigns total nursing costs to ER and OR based on the number of patients serviced by each line. Total hospital annual nursing costs for these two lines are expected to equal $300,000. The table below shows expected patient volume for both lines.

Measure
ER
OR
Total
Number of Patients (ER visits or OR surgeries)
1,000
1,000
2,000
Number of total sign checks
2,000
4,000
6,000
Number of nursing hours
10,000
5,000
15,000

Required:
1.      Using the current cost system, calculate the hospital-wide rate on number of patients.

The hospital-wide rate      : $300,000       : $150 per number of patient
                                               2,000

2.      Calculate the amount of nursing costs that the current cost system assigns to the ER and to the OR.
Measure
Nursing Costs (ER)
Nursing Costs (OR)
Number of Patients (ER visits or OR surgeries)


$150 x 1,000
$150,000

$150 x 1,000

$150,000

3.      Using the results from Requirement 2, calculate the cost per OR nursing hour under the current cost system.
Cost per OR nursing hour : $150,000       : $30
                                                5,000

After discussion with several experienced nurses, Jack Bauer (SHH’s accountant) decided that assigning nursing costs to the two service lines based on number of time that nurses must check patients’ vital signs might more closely match the underlying use of costly hospital resources. Therefore, for comparative purposes, Jack decided to develop a second cost system on his computer that assigns total nursing costs to the ER and OR based on the number of times nurses check patients’ vital signs. This system is referred to as the “vital-signs costing system.” The earlier table also shows data for vital signs checks for lines.

4.      Using the vital-sign costing system, calculate the hospital-wide rate based on the number of vital signs checks.
The hospital-wide rate      : $300,000       : $50
                                               6,000
5.      Calculate the amount of nursing costs the vital-signs costing system assigns to the ER and to the OR.
Measure
Nursing Costs (ER)
Nursing Costs (OR)
Number of vital signs checks


$50 x 2,000
$100,000

$50 x 4,000

$200,000

6.      Using the results from Requirement 5, calculate the cost per OR nursing hour under the vital-signs control system.
Cost per OR nursing hour : $200,000       : $40
                                                5,000

Budgeting and Variance Analysis
In an effort to better plan for and control OR costs, SHH management asked Jack to calculate the flexible budget variance (i.e., flexible budget costs-actual costs) for OR nursing costs, including the price variance and efficiency variance that make up the flexible budget variance for OR nursing costs. Given that Jack is interested in comparing the reported costs of both systems, he decided to prepare the requested OR variance analysis for both the current cost system and the vital signs costing system. In addition, Jack chose to use each cost system’s estimate of the cost per OR nursing hour as the standard cost per OR nursing hour. Jack collected the following additional information for use in preparing the flexible budget variance for both systems:
Actual number of surgeries performed = 950
Standard number of nursing hours allowed for each OR surgery = 5
Actual number of OR nursing hours used = 5,000
Actual OR nursing costs = $190,000

7.      For the OR service line, use the information above and the cost per OR nursing hour under the current cost system to calculate the
a.       Flexible budget variance. (Hint: Use your answer to Requirement 3 as the standard cost per OR nursing hour for the current cost system).
AP = $190,000/5,000 = $38

Actual Costs
Standard Cost
Total Variance

AP x AQ
SP x SQ
(AP x AQ) – (SP x SQ)
OR
$38 x 5,000:
$30 x 4,750


$190,000
$142,500
$47,500 U

b.      Price variance
Price Variance             = (AP – SP) x AQ
                                    = ($38 - $30) x 5,000
                                    = $40,000 U

c.       Efficiency variance
Efficiency Variance    = (AQ – SQ) x SP
                                                = (5,000 – 4,750) x $30
                                                = $7,500 F

8.      For the OR service line, use the information above and the cost per OR nursing hour under the vital signs cost system to calculate the
a.       Flexible budget variance. (Hint: use answer in Requirement 6 as the standard cost per OR nursing hour for the vital signs cost system).
AP = $190,000/5,000 = $38

Actual Costs
Standard Cost
Total Variance

AP x AQ
SP x SQ
(AP x AQ) – (SP x SQ)
OR
$38 x 5,000:
$40 x 4,750


$190,000
$190,000
$0

b.      Price variance
Price Variance             = (AP – SP) x AQ
                                    = ($38 - $40) x 5,000
                                    = $10,000 F

c.       Efficiency variance
Efficiency Variance    = (AQ – SQ) x SP
                                    = (5,000 – 4,750) x $40
                                    = $10,000 U


Discussion of Reported Costs and Variances from the Two Systems
9.      Consider SHH’s need to control its skyrocketing costs, Jack’s discussion with experienced nurses regarding their use hospital resources, and the reported costs that you calculated from each cost system. Based on the consideration, which cost system (current or vital signs) should Jack choose? Briefly explain the reasoning behind your choice.
Sistem Cost yang harus dipilih oleh Jack adalah vital sign karena lebih menguntungkan dan lebih menggamarkan dengan keadaan yang sebenarnya.

10.  What does each of the calculated variances suggest to Jack regarding actions that should or should not take with respect to investigating and improving each variance? Also, briefly explain why the variances differ between the two cost systems.
Varian adalah perbedaan antara standar harga dan kuantitas dengan harga dan kuantitas yang sebenarnya terjadi. Jika varian nya semakin besar maka Jack harus segera melakukan investigasi penyebabnya untuk dapat mengontrol biaya. 2 cost sistem memberikan varian yang berbeda karena standar cost unit yang digunakan juga berbeda.


Problem 11-57 Understanding Relationships, Incomplete Data, Overhead Analysis
Lynwood Company produces surge protectors. To help control costs, Lynwood employs a standard costing system uses a flexible budget to predict overhead costs at various levels of activity. For the most recent year, Lynwood used a standard overhead rate of $18 per direct labor hour. The rate was computed using practical activity. Budgeted overhead costs are $396,000 for 18,000 direct labor hours and $540,000 for 30,000 direct labor hours. During the past year, Lynwood generated the following data: (a) Actual production: 100,000 units; (b) Fixed overhead volume variance: $20,000 U; (c) Variable overhead efficiency variance: $18,000 F; (d) Actual fixed overhead costs: $200,000; and (e) Actual variable overhead costs: $310,000.
Required:
1.      Calculate the fixed overhead rate
Fixed overhead rate          = $200,000      = $2
                                              100,000



2.      Determine the fixed overhead spending variance
Fixed overhead spending variance           = Actual Fixed Overhead – Budgeted Fixed Overhead
                                                                  = $200,000 - $196,000
                                                                  = $4000 U




3.      Determine the variable overhead spending variance
Variable overhead spending variance       = Actual variable overhead – (AH x SVOR)
                                                                  = $310,000 – $302,004
                                                                  = $7,996 U




4.      Determine the standard hours allowed per unit of product
Standard hours allowed per unit product = 0.2667 hour per unit
                                                                     

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