Need Help with problem 8.1. Answering a- f questions s, TRow many Resible budget

Question

Need Help with problem 8.1. Answering a- f questions

s, TRow many Resible budgets must be constricto Problems sI Consilr the fbollowing 2011 data for Newark General Hospital (in miliom Hesibe Bunfecs 54.8 4.1 Static Budect ctual Results Revenues 4.1 Irofits 0.3 a. Calculate and interprer the protit variance h. Calculare and inerpret the revenue variance c. Calculate and intorpret the cot vanance. d Cakudate and sttorpect the volaie and price variances on the revenue side. e. Calculate and interpret the volume and management varidnces on the os side L How are the vanances calculated abowe relateili 8.2 Here are the 2011 revemses for the Wendover Giroup Practice Associa oon for four délerent budgets (in thousands of dollars) Fesible Flesible Enrollment, State Enrollment/Utlization, Actual

Explanation / Answer

Newark General Hospital Static Budget Flexible Budget Actual Results Revenues 4.7 4.8 4.5 Cost 4.1 4.1 4.2 Profits 0.6 0.7 0.3 Variance = Budgeted-Actual Variance Calculation Static-Actual Remarks Flexible-Actual Remarks Revenue variance 0.2 unfavorable 0.3 unfavorable Cost Variance -0.1 unfavorable -0.1 unfavorable Profit Variance 0.3 unfavorable 0.4 unfavorable (a) Profit Variance comes to unfavorable in the following situations: Differences between actual and expected product pricing Differences between actual and expected unit sales Changes in the amount of overhead costs incurred Changes in the amount of scrap incurred Changes in labor costs Changes in the cost of materials (b) Revenue Variance is mix of three variance: Sales Volume Variance Sales Price Variance Sales Mix Variance (C) Cost Variance can be for following Reasons: Direct material, Direct Labor, Manufacturing Overheads etc. (d) Sales volume variance: This is the difference between the actual and expected number of units sold, multiplied by the budgeted price per unit. Selling price variance: This is the difference between the actual and budgeted unit price, multiplied by the actual number of units sold. (e) Volume Variance: A volume variance is the difference between the actual quantity consumed and the budgeted amount expected to be or consumed, multiplied by the standard price per unit. This variance is used as a general measure of whether a business is generating the amount of unit volume for which it had planned. (f) Variances calculated above are related to in a stepby step process like revenue variance and cost variance directly affect profit variance. If these variance increase or decrease these affects profit directly

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