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Variance Analysis paper

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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