Question

Analyze Valley Hospital’s admissions time variance

Valley Hospital began using standards to evaluate its Admissions Department. The standard was broken into two types of admissions as follows:

Type of Admission	Standard Time to Complete Admission Record
Unscheduled	30 min.
Scheduled	15 min.

The unscheduled admission took longer because name, address, and insurance information needed to be determined and verified at the time of admission. Information was collected on scheduled admissions prior to admitting the patient, thus requiring less time in admissions.

The Admissions Department employs four full-time people for 40 hours per week at $15 per hour. For the most recent week, the department handled 140 unscheduled and 340 scheduled admissions.

a. How much was actually spent on labor for the week?
$

b. What are the standard hours for the actual volume of work for the week?
hours

c. Compute the direct labor time variance, and report how well the department performed for the week. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.

Time variance

$

d. Which of the following factors may cause an unfavorable direct labor time variance for the Admissions Department?

Answer 1

Requirement A:-

The amount spent on labor for the week is :-

= 40 hours * 4 employees * $15 per hour

=$2,400

Amount spent on labor = $2,400

Requirement B:-

The standard hours for actual volume of work :-

Unscheduled = 140 * 30 mins = 4,200 minutes (70 hours)

Scheduled = 340 * 15 mins = 5,100 minutes ( 85 hours)

Total standard hours = 155 hours

Requirement C:-

Direct Labor time variance = (Actual hours - Standard hours for actual output ) * Standard rate per hour

Direct labor time variance = (160 hours - 155 hours) * $15

=5 hours * $15

=$75 Unfavorable

Since the actual hours worked is greater than the standard hours allowed for actual output, the correct answer is $75 Unfavorable.

As such, based on this observation , we can conclude that Admission department has not performed effectively as the number of actual hours exceeded the number of standard hours resulting in an unfavorable variance.

Requirement D:-

The following might be some of the reasons why there has been an Unfavorable direct time variance :-

1.) Ineffective and inefficient staff.

Suppose that the company has placed inefficient and ineffective staff to carry out the duties of the admission department, the staff might take longer time than usual to complete the admission process. This would result in inefficiencies and would therefore result in an increase of the hours spent on the admission process.

2.) Increased number of unscheduled visits

As can be observed, there are around 140 unscheduled visits out of the total of 480 visits (140 unscheduled 340 scheduled visits). The unscheduled visits involve a higher amount of time to complete the admission process like verification of information , filling up the details, completing the registration form/admission form, etc. As such, the increase in unscheduled visits would directly be relative to the increased time per admission.

3.) Unexpected technical issues

During the course of the operations, the hospital might have faced few technical issues with its backend, administration systems , etc which would result in the operations to be delayed. As such, even this might have contributed to the Unfavorable direct time variance.

Please let me know if you have any questions via comments and all the best :)