Here are the budgets of Brandon Surgery Center for the most recent historical qu

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

Simple Flexible Actual Number of surgeries $              1,200.00 $             1,300.00 $      1,300.00 Patient Revenue $              2,400.00 $             2,600.00 $      2,535.00 Salary expense $              1,200.00 $             1,300.00 $      1,365.00 Nonsalary expense $                 600.00 $                650.00 $          585.00 Profit $                 600.00 $                650.00 $          585.00 Flexible budget is calculated as actual output x standard rate, which in this case is the actual number of surgeries*(simple number/simple number of surgeries) Patient revenue $              2,600.00 Salary expense $              1,300.00 Nonsalary expense $                 650.00 Profit $                 650.00 Variance for Simple Variance for Flexible Simple Flexible Actual dollar percentage dollar pecentage Number of surgeries 1200 1300 1300         Patient Revenue $              2,400.00 $             2,600.00 $      2,535.00 $                  (135.00) -6% $    65.00 3% Salary expense $              1,200.00 $             1,300.00 $      1,365.00 $                  (165.00) -14% $ (65.00) -5% Nonsalary expense $                 600.00 $                650.00 $          585.00 $                      15.00 3% $    65.00 10% Profit $                 600.00 $                650.00 $          585.00 $                      15.00 3% $    65.00 10% Looking at both simple and flexible variance, the company is profitable. In the simple budget, there was not enough money budgeted for the patient revenue and both simple and flexible budgets there was not enogh money budgeted for the salary expenses. Overal the surgery center is profitable regardles of which budget is used, simple or flexible.

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