Here are the budgets of Brandon Surgery Center for the most recent historical qu
ID: 2537658 • Letter: H
Question
Here are the budgets of Brandon Surgery Center for the most recent historical quarter (thousands of dollars?):
Static Flexible Actual
Number of surgeries 1,200 1,300 1,300
Patient Revnue $2400 $2600 $2535
Salary Expense 1200 1300 1365
non-salary expense 600 650 585
profit $600 $650 $585
The center assumes that all revenues and costs are variable and hence tied directly to patient volume.
A. Explain how each amount in the flexible budget was calculated (Hint: Examine the static budget to determine the relationship of each budget line to volume.)
B. Determine the variances for each line of the profit and loss statement, both in dollar terms and in percenage terms. (Hint: Each line has a total variance, a volume variance, and a price varianc (fro revenues) and mananagment variance (for expenses)
C. What do the Part b results tell Brandons managers about the surgery centers operations for the quarter?
Explanation / Answer
A. Since all revenues and costs are variable, the per surgery revenue or cost is calculated based on the static budget by dividing the revenue or cost by the number of surgeries which is 1200. This per surgery rate is then multiplied by the number of surgeries for flexible budget i.e. 1300 to arrive at each amount in the flexible budget.
B.
C. The Part B results show that though there has been an increase in the number of surgeries, and the patient revenue and non-salary expense have a favorable variance, the overall profit shows an unfavorable variance due to an unfavorable salaries expense variance.
Static Budget Flexible Budget Number of surgeries 1200 1300 Total Per unit Patient revenue 2400 2 2600 Salary expense 1200 1 1300 Non-salary expense 600 0.5 650 Profit 600 0.5 650Related Questions
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