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Mountain View Hospital Nursing Variances Essay Assignment Paper

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Mountain View Hospital Nursing Variances Essay Assignment Paper

Mountain View Hospital has adopted a standard cost accounting system for evaluation and control of nursing labor. Diagnosis related groups (DGRS) 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 that perceives hospitals to be multiproduct firms where in-patient treatment procedures are related to the numbers and types of patient aliments treated.

Mountain View Hospital has developed standard nursing times for the treatment of each DRG classification, and nursing labor hours are assumed to vary with the number of DRG’s 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:


DRG Classification RN LPN AIDE
1 6 4 3
2 26 16 10
3 10 5 4
4 12 7 10

Standard Hourly Rate RN LPN AIDE
$12 $8 $6

The results of operations for the fourth floor-nursing unit for the month of May appear below.

Actual Number of Patients
DRG 1 250
DRG 2 90
DRG 3 240
DRG 4 140
Total 720


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 Mountain View hospital calculated the following standard times for the fourth floor-nursing unit for May


DRG Classification No. of Patients RN LPN AIDE RN LPN AIDE
1 250 6 4 5 1500 1000 1250
2 90 26 16 10 2340 1440 900
3 240 10 5 4 2400 1200 960
4 140 12 7 10 1680 980 1400
7920 4620 4510
The hospital calculates labor variances for each reporting period by labor classification (RN, LPN, AIDE). The variances are used by nursing supervisors and hospital administration to evaluate the performance of nursing labor.


Calculate the total nursing labor variance for the fourth floor nursing unit of Mountain View for May, indicating how much of this variance is attributed to the following for each class of nurses.

(a) Labor efficiency
(b) Rate differences

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