Cleveland Clinic uses client-visits as its measure of activity. During May, the

Question

Cleveland Clinic uses client-visits as its measure of activity. During May, the clinic budgeted for 2,100 client-visits, but its actual level of activity was 2,050 client-visits. The clinic has provided the following data concerning the formulas used in its budgeting and its actual results for May:

Data used in budgeting:

Actual results for September:
Revenue …………………………………………….. $82,960
Personnel expenses …………………………… $45,935
Medical supplies ………………………………..   $17,195
Occupancy expenses ………………………….   $ 7,875
Administrative expenses ……………………   $ 3,985

The spending variance for occupancy expenses in May would be closest to:

Fixed Element per Month Variable Element per Client-Visit Revenue $40.00 Personnel expenses $23,200 $11.30 Medical supplies $800 $7.90 Occupancy expenses $5,700 $1.10 Administrative expenses $3,300 $0.30      Total expenses $33,000 $20.60

Explanation / Answer

Spending variance under occupancy expense = Flexible budget expense-actual expense

                                                                           = (2050*1.1+5700)-7875

Spendig variance under occupancy expense = 80 F

so answer is a) $80 F

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