Budgeting and Variance Analysis

Instructions:

The following are budgeted and actual revenues and expenses for a hospital.

Budgeted Actual

Revenues

Surgical Volume 2,500 2,700

Gift Shop Revenues $19,000 $20,000

Surgery Revenues $600,500 $850,750

Parking Revenues $16,000 $18,000

Expenses

Patients Days 27,000 27,000

Pharmacy $120,000 $160,000

Misc Supplies $66,000 $77,500

Fixed Overhead Costs $808,000 $880,000

Using an Excel spreadsheet to show your calculations:

1. Determine the total variance between the planned and actual budgets for Surgical Volume. Is the variance favorable or unfavorable?

2. Determine the total variance between the planned and actual budgets for Patient Days. Is the variance favorable or unfavorable?

3. Determine the service-related variance for Surgical Volume.

4. Determine the service-related variance for Patient Days.

5. Prepare a flexible budget estimate. Present a side-by-side budget, flexible budget estimate, and the actual Surgical Revenues.

6. Prepare a flexible budget estimate. Present a side-by-side budget, flexible budget estimate, and the actual Patient Expenses.

7. Determine what variances are due to change in volume and what variances are due to change in rates.

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