Refer to Carroll Clinics 2011 operating budget. Carroll Clinic: New 2011 Results
ID: 2772661 • Letter: R
Question
Refer to Carroll Clinics 2011 operating budget.
Carroll Clinic: New 2011 Results
/. Volume:
A. FFS 34,000 visits
B. Capitated lives 30,000 members
Number of member-months 360,000
Actual utilization per
member-month 0.12
Number of visits 43,200 visits
C. Total actual visits 77,200 visits
II. Revenues:
A.FFS $28 per visit
X 34,000 actual visits $ 952,000
B. Capitated lives $ 2.75 PMPM
X 360,000 actual member-months $ 990,000
C.Total actual revenues $1,942,000
III. Costs:
A. Variable Costs:
Labor $1,242,000 (46,000 hours at $27/hour)
Supplies 126,000 (90,000 units at $1.40/unit)
Total variable costs $ 17.72 ($1,368,000 / 77,200)
B. Fixed Costs
Overhead, plant,
and equipment $525,000
C. Total actual costs $1,893,000
IV. Profit & Loss Statement:
Revenues:
FFS $952,000
Capitated $990,000
Total $1,942,000
Costs:
Variable:
FFS $602,487
Capitated 765,513
Total $1,368,000
Contribution Margin $574,000
Fixed Costs 525,000
Actual profit $49,000
A. construct carroll's flexible budget for 2011. and B. What are the profit variance, revenue variance, and cost variance?
Explanation / Answer
Solution-(a)
Particulars
Amount $
Realized Volume;
FFS Visits
34,000
Capitated Visits (30,000*12*.12)
43,200
Total
77,200
Revenues
FFS Visits (34000*25)
850,000
Capitated Visits (30,000*12*3)
1,080,000
Total
1,930,000
Variable Cost
FFS Visits (34000*15)
510,000
Capitated Visits (43,200*15)
648,000
Total
1,158,000
Fixed Cost
500,000
Total Cost
1,658,000
Profit (1930000 -1658000)
272,000
Note;
Although the number of enrollees is the same as in the Static Budget , the number of Capitated fees fell over by 10,000 because the utilization fell from a projected .15 per member month to .12 per member month.
Solution-(b)
Particulars
Static Budget
Flexible Budget
Actual Budget
Assumptions
FFS Visits
36,000
34,000
34,000
Capitated Visits
54,000
43,200
43,200
Total
90,000
77,200
77,200
Revenues
FFS Visits
900,000
850,000
952,000
Capitated Visits
1,080,000
1,080,000
990,000
Total
1,980,000
1,930,000
1,942,000
Variable Cost
FFS Visits
540,000
510,000
602,487
Capitated Visits
810,000
648,000
765,513
Total
1,350,000
1,158,000
1,368,000
Fixed Cost
500,000
500,000
525,000
Total Cost
1,850,000
1,658,000
1,893,000
Profit
130,000
272,000
49,000
Profit Variance
= Actual profit – Static profit
= $49,000 - $ 130,000
= -$81,000
Revenue Variance
= Actual revenue – Static revenue
= $1,942,000 - $ 1,980,000
= -$38,000
Cost Variance
= Static Cost – Actual Cost
= $1,850,000 - $ 1,893,000
= -$43,000
Particulars
Amount $
Realized Volume;
FFS Visits
34,000
Capitated Visits (30,000*12*.12)
43,200
Total
77,200
Revenues
FFS Visits (34000*25)
850,000
Capitated Visits (30,000*12*3)
1,080,000
Total
1,930,000
Variable Cost
FFS Visits (34000*15)
510,000
Capitated Visits (43,200*15)
648,000
Total
1,158,000
Fixed Cost
500,000
Total Cost
1,658,000
Profit (1930000 -1658000)
272,000
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