Product Mix Variance and Price Variance
The director of a large regional reference laboratory was reviewing its performance over the past year. The laboratory had gross revenues of $3,500,000. Some of the business was to managed care plans and to large-volume users that resulted in a discount of $350,000, which was $25,000 more than anticipated due to intense competition. The cost of providing the lab testing was $1,400,500, which was $250,000 higher than expected. Direct costs for salaries were $870,000.
Address each of the following in your paper:
- What was the product mix variance experienced by the laboratory service? Explain your answer.
- What was the price variance? Explain your answer.