Lizana Clinic uses client-visits as its measure of activity. During December, th

Question

Lizana Clinic uses client-visits as its measure of activity. During December, the clinic budgeted for 4,600 client-visits, but its actual level of activity was 4,580 client-visits. The clinic has provided the following data concerning the formulas used in its budgeting and its actual results for December

Data used in budgeting:

$48,200

$20.40     

Actual results for December:

The overall revenue and spending variance (i.e., the variance for net operating income in the revenue and spending variance column on the flexible budget performance report) for December would be closest to:

$7,658 F

$7,982 U

$7,658 U

$7,982 F

Lizana Clinic uses client-visits as its measure of activity. During December, the clinic budgeted for 4,600 client-visits, but its actual level of activity was 4,580 client-visits. The clinic has provided the following data concerning the formulas used in its budgeting and its actual results for December

Explanation / Answer

Answer:

1. Revenue as Flexible budget = 4,580*$36.60 = $167,628

Revenue Actual = $130,000

Revenue Variance = $37.628 (U)

2. Total Expenditure as per flexible budget = $48,200 + $20.40*4580 = $141,632

Total Expenditure Actual = $70,020 + $21,012 + $13,190 + $7,440 = $ 111,662

Spending Variance = $141,632 - $111,662 = $29,970 (F)

Overall revenue and spending variance = $37.628 (U) + $29,970 (F) = $7,658 (U)

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