Consider the following 2007 data for Newark General Hospital (in millions of dol
ID: 2667366 • Letter: C
Question
Consider the following 2007 data for Newark General Hospital (in millions of dollars):Static Flexible Actual
Budget Budget Results
Revenues $4.7 $4.8 $4.5
Costs 4.1 4.1 4.2
Pro?ts 0.6 0.7 0.3
a. Calculate and interpret the pro?t variance.
b. Calculate and interpret the revenue variance.
c. Calculate and interpret the cost variance.
d. Calculate and interpret the volume and price variances on the revenue side.
e. Calculate and interpret the volume and management variances on the cost side.
f. How are the variances calculated above related?
Explanation / Answer
Static Budget
Flexible Budget
Actual Results
Revenue
$4.70
$4.80
$4.50
Costs
($4.10)
($4.10)
($4.20)
Profits
$0.60
$0.70
$0.30
(a) Calculate and interpret the Profit Variance:
Profit variance is the difference between actual profit and budgeted profit
Profit variance = [$0.30 - $0.70]
Profit Variance = -$0.40
(b) Calculate and interpret the revenue variance:
Revenue Variance = [Actual Revenue – Standard Revenue]
Revenue Variance = [$4.5 – $4.80]
Revenue Variance = -$0.30
(c) Calculate and interpret the cost variance:
Cost Variance = [Actual Cost – Budgeted Cost]
Cost Variance = [$4.2 - $4.1]
Cost Variance = $0.10
Static Budget
Flexible Budget
Actual Results
Revenue
$4.70
$4.80
$4.50
Costs
($4.10)
($4.10)
($4.20)
Profits
$0.60
$0.70
$0.30
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