[Solved]: Mountain View Hospital (MVH) has adopted a standard…

Mountain View Hospital (MVH) has adopted a standard cost accounting system for evaluation and control of nursing labor. Diagnosis Related Groups (DRGs), instituted by the U.S. government for health insurance reimbursement, are used as the output measure in the standard cost system. A DRG is a patient classification scheme in which inpatient treatment procedures are related to the numbers and types of patient ailments treated. MVH has developed standard nursing times for the treatment of each DRG classification, and nursing labor hours are assumed to vary with the number of DRGs treated within a time period. The nursing unit on the fourth floor treats patients with four DRG classifications. The unit is staffed with registered nurses (RNs), licensed practical nurses (LPNs), and aides. The standard nursing hours and salary rates are as follows. Fourth Floor Nursing Unit Standard Hours DRG Classification RN LPN Aide 1 6 4 5 2 26 16 10 3 10 5 4 4 12 7 10 Standard Hourly Rates RN $12.00 LPN 8.00 Aide 6.00 For the month of May, the results of operations for the fourth floor nursing unit are presented below: Actual Number of Patients DRG 1 250 DRG 2 90 DRG 3 240 DRG 4 140 720 RN LPN Aide Actual hours 8,150 4,300 4,400 Actual salary $100,245 $35,260 $25,300 Actual hourly rate $12.30 $8.20 $5.75 The accountant for MVH calculated the following standard times for the fourth floor nursing unit for the month of May: DRG Classification No. of Patients Standard Hours per DRG Total Standard Hours RN LPN Aide RN LPN Aide 1 250 6 4 5 1,500 1,000 1,250 2 90 26 16 10 2,340 1,440 900 3 240 10 5 4 2,400 1,200 960 4 140 12 7 10 1,680 980 1,400 7,920 4,620 4,510 The hospital calculates labor variances using a flexible budgeting approach for each reporting period by labor classification (RN, LPN, Aide), since the hospital does not have data to calculate variances by DRG. Labor mix and yield variances are also calculated, since one labor input can be substituted for another labor input. Variances are used by hospital administration to evaluate performance of nursing labor. A. Calculate (a) the static budget variance for the fourth-floor nursing unit of MVH for the month of May, indicating how much of this variance is attributed to (b) labor efficiency and (c) rate differences.