Consider the following 2012 data for Newark General Hospital (in millions of dol
ID: 2703854 • Letter: C
Question
Consider the following 2012 data for Newark General Hospital (in millions of dollars);
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 two profit variances.
b. Calculate and interpret the two revenue variances.
c. Calculate and interpret the two cost variances.
d. How are the variances related?
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
Explanation / Answer
Profit variance is the difference between actual profit and budgeted profitProfit variance = [$0.30 - $0.70]
Profit Variance = -$0.40
Revenue Variance = [$4.5
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