The administrator of Break-a-Leg Hospital is aware of the need to keep his costs

Question

The administrator of Break-a-Leg Hospital is aware of the need to keep his costs down because he just negotiated a new capitated arrangement with a large insurance company. The following are selected planned and actual expenses for the previous month. Planned Actual Patient days 24,000 23,000 Pharmacy $100,000 $140,000 Miscellaneous supplies $56,000 $67,500 Fixed overhead costs $708,000 $780,000 a. Determine the total variance associated with the planned and actual expenses. b. Calculate the amount of service-related variance. c. Determine what variance is due to change in volume and what variance is due to change in rates. d. Determine the volume variance and rate variance based on per unit rates.

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