Please answer question in detail addressing all parts. Reference Table 6.2 is al

Question

Please answer question in detail addressing all parts. Reference Table 6.2 is also shown at the bottom:

------REFERENCE TABLE 6.2-------

6.3 Refer to Carroll Clinic's 2008 operating budget contained in Table 6.2. Instead of the actual results reported in Table 6.3, assume the results reported below: Carroll Clinic: New 2008 Results I. Volume (Number of Visits) Payer A Payer B Total 11,000 12,000 23,000 Reimbursement (Per Reimbursement (Per Visit) $95 $95 Il. Payer A Payer B IlI. Costs Variable Costs: Supplies $350,000

Explanation / Answer

Answer: Profit variance= Actual profit - static profit

Revenue variance = Actual revenue - static revenue

Cost variance = Static cost - Actual cost

Based on simple: Profit variance = 335000-130000=205000

Revenue variance =2185000-1980000=205000

Cost variance = 1850000-1850000=0

Based on flexible budget : Profit variance = 335000-300000=35000

Revenue variance =2185000-2180000=5000

Cost variance = 1850000-1880000=30000

Particulars Static budget Flexible budget Actual budget Number of visits Payer A 9000 11000 11000 Payer B 12000 12000 12000 Revenue Payer A 900000 1100000 1045000 Payer B 1080000 1080000 1140000 Total revenue 1980000 2180000 2185000 Variable costs supplies 315000 345000 350000 Fixed cost 1535000 1535000 1500000 Total cost 1850000 1880000 1850000 Profit 130000 300000 335000

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