John Fleming, chief administrator for Valley View Hospital, is concerned about the costs for tests in the hospital's lab

John Fleming, chief administrator for Valley View Hospital, is concerned about the costs for tests in the hospital's lab. Charges for lab tests are consistently higher at Valley View than at other hospitals and have resulted in many complaints. Also, because of strict regulations on amounts reimbursed for lab tests, payments received from insurance companies and governmental units have not been high enough to cover lab costs.

Mr. Fleming has asked you to evaluate costs in the hospital's lab for the past month. The following information is available:

• Two types of tests are performed in the lab-blood tests and smears. During the past month, 1,800 blood tests and 2,400 smears were performed in the lab. Small glass plates are used in both types of tests. During the past month, the hospital purchased 12,000 plates at a cost of $28,200. This cost is net of a 6% quantity discount. 1,500 of these plates were unused at the end of the month; no plates were on hand at the beginning of the month.
• During the past month, 1,150 hours of labor time were recorded in the lab at a cost of $13,800.
• The lab's variable overhead cost last month totaled $7,820.

Valley View Hospital has never used standard costs. By searching industry literature, however, you have determined the following nationwide averages for hospital labs:
Plates: Two plates are required per lab test. These plates cost $2.50 each and are disposed of after the test is completed.
Labor: Each blood test should require 0.3 hours to complete, and each smear should require 0.15 hours to complete. The average cost of this lab time is $14 per hour.
Overhead: Overhead cost is based on direct labor-hours. The average rate for variable overhead is $6 per hour.

1. Compute a materials price variance for the plates purchased last month and a materials quantity variance for the plates used last month.
2. For labor cost in the lab:
• Compute a labor rate variance and a labor efficiency variance.
• 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-fourths assistants. Would you recommend that this policy be continued? Explain.
3. Compute the variable overhead rate and efficiency variances. Is there any relation between the variable overhead efficiency variance and the labor efficiency variance? Explain.

Click here for the solution: John Fleming, chief administrator for Valley View Hospital, is concerned about the costs for tests in the hospital's lab

Before preparing financial statements for the current year, the chief accountant for Springer Company discovered the following errors in the accounts

E11-16 Before preparing financial statements for the current year, the chief accountant for Springer Company discovered the following errors in the accounts.

The declaration and payment of $50,000 cash dividend was recorded as a debit to Interest Expense $50,000 and a credit to Cash $50,000.
A 10% stock dividend (1,000 shares) was declared on the $10 par value stock when the market value per share was $16. The only entry made was: Retained Earnings (Dr.) $10,000 and Dividend Payable (Cr.) $10,000. The shares have not been issued.
A 4-for-1 stock split involving the issue of 400,000 shares of $5 par value common stock for 100,000 shares of $20 par value common stock was recorded as a debit to Retained Earnings $2,000,000 and a credit to Common Stock $2,000,000.

Instructions
Prepare the correcting entries at December 31.

Click here for the solution: Before preparing financial statements for the current year, the chief accountant for Springer Company discovered the following errors in the accounts

You are the president and chief executive officer of a family owned manufacturing firm with assets of $45 million

You are the president and chief executive officer of a family owned manufacturing firm with assets of $45 million. The company articles of incorporation and state law place no restrictions on the sale stock to outsiders. An unexpected opportunity to expand arises that will require an additional investment of $ 14 million. A commitment must be made quickly if this opportunity is to be taken. Existing stockholders are not in a position to provide the additional investment. You wish to maintain family control of the firm regardless of which form of financing you might undertake. As a first step, you decide to contact an investment banking firm.

a) What considerations might be important in the selection of an investment banking firm?
b) A member of your board has asked if you have considered competitive bids for the distribution of your securities compared to a negotiated contract with a particular firm. What factors are involved in this decision?
c) Assuming that you have decided upon a negotiated contract, what are the first questions that you would ask of the firm chosen to represent you?
d) As the investment banker, what would be your first actions before offering advice?
e) Assuming the investment banking firm is willing to distribute your securities, describe the alternative plans that might be included in a contract with the banking firm.
f) How does the investment banking firm establish a selling strategy?
g) How might the investment banking firm protect itself against a drop in the price of the security during the selling process?
h) What follow-up services will be provided by the banking firm following a successful distribution of the securities?
i) Three years later, as an individual investor, you decide to add your own holding of the security but only at a price that you consider appropriate. What form of order might you place with your broker?

Click here for the solution: You are the president and chief executive officer of a family owned manufacturing firm with assets of $45 million