Calculate the total variance for patient revenue, salary expense, non-salary exp

Question

Calculate the total variance for patient revenue, salary expense, non-salary expense and profit, and interpret cach variance as favorable or unfavorable. Calculate the flexible budget for Pinehurst Surgery Center. Assume that all revenues and costs arc variable and arc tied directly to volume. Calculate the volume variance and the flexible budget variance for patient revenue, salary expense, non-salary expense and profit, and interpret cach variance as favorable or unfavorable. Assume that you are responsible for investigating the flexible budget variances for patient revenues and salary expense. What factors would you consider (name the factors that might be driving the variances)

Explanation / Answer

Given

Static Budget

Actual

Number Of Surgeries

1,200

1,300

Patient Revenue

$3,600

$3,755

Salary Expense

1,200

1,365

Non Salary Expense

900

850

Profit

1,500

1,520

a. Variance Calculation

Static

Actual

Variance

Favourable/Unfavourable

Number Of Surgeries

1,200

1,300

100

Favourable

Patient Revenue

$3,600

$3,755

$155.00

Favourable

Salary Expense

1,200

1,365

$165.00

Unfavourable

Non Salary Expense

900

850

($50.00)

Favourable

Profit

1,500

1,520

$20.00

Favourable

b. Flexible Budget calculation

Static Budget

Flexible Budget

Number Of Surgeries

1,200

Number Of Surgeries

1,300

Patient Revenue/Surgery

$3.00

Patient Revenue

=Patient Revenue/Surgery * Actual Number of Surgeries

$ 3,900

Salary Expense/Surgery

$1.00

Salary Expense

=Salary Expense/Surgery * Actual Number of Surgeries

$ 1,300

Non Salary Expense/Surgery

$0.75

Non Salary Expense

=Non Salary Expense/Surgery * Actual Number of Surgeries

$     975

Profit/Surgery

$1.25

Profit

=Profit/Surgery * Actual Number of Surgeries

$ 1,625

c

Volume Variance Calculation

Number Of Surgeries Budgeted

1,200

Number Of Surgeries Actual

1,300

Budgeted Revenue / Cost

Volume Variance = (Actual Surgeries Done - Budgeted Surgeries Done) * Bugeted Revenue/Cost

Patient Revenue/Surgery

$3.00

Revenue Variance

$300

Salary Expense/Surgery

$1.00

Salary Expense Variance

$100

Non Salary Expense/Surgery

$0.75

Non Salary Expense Variance

$75

Profit/Surgery

$1.25

Profit Variance

$125

Flexible Budget Variance

Flexible Budget

Actual

Flexible Budget Variance (Actual - Flexible Budget)

Number Of Surgeries

1,300

1,300

Patient Revenue

$            3,900

$3,755

($145)

Salary Expense

$            1,300

$1,365

$65

Non Salary Expense

$                975

$850

($125)

Profit

$            1,625

$1,520

($105)

D

Following factors drive variance

1. Decrease in Revenue per surgery

2. Increase in Salary per surgery

3. Decrease in non salary expense per surgery

4. Volume of surgeries done

Given

Static Budget

Actual

Number Of Surgeries

1,200

1,300

Patient Revenue

$3,600

$3,755

Salary Expense

1,200

1,365

Non Salary Expense

900

850

Profit

1,500

1,520

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