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Healthcare Financial Management and Economics

Week 9 Assignment – Budgeting

Instructions:

The following are budgeted and actual revenues and expenses for a hospital.

______________________________________________________________________________

Budgeted Actual

Revenues

Surgical Volume 2,500 2800

Gift Shop Revenues $19,500 $22,200

Surgery Revenues $590,500 $850,000

Parking Revenues $18,500 $21,800

Expenses

Patients Days 28,000 26,000

Pharmacy $123,000 $155,000

Misc Supplies $695,000 $790,000

Fixed Overhead Costs $840,000 $875,000

Using an Excel spreadsheet to show your calculations:

1. Determine the total variance between the planned and actual budgets for Surgical Volume. Is the variance favorable or unfavorable?

2. Determine the total variance between the planned and actual budgets for Patient Days. Is the variance favorable or unfavorable?

3. Determine the service-related variance for Surgical Volume. 4. Determine the service-related variance for Patient Days. 5. Prepare a flexible budget estimate. Present side-by-side budget, flexible budget estimate,

and the actual Surgical Revenues. 6. Prepare a flexible budget estimate. Present side-by-side budget, flexible budget estimate,

and the actual Patient Expenses. 7. Determine what variances are due to change in volume and what variances are due to

change in rates.

09_budgetAndVarianceTemplate.xlsx

Week 9 Assignment Template

Revenues Expenses
Givens: Budgeted Actual Givens: Budgeted Actual
[A] Surgical volume [A] Patient days
[B] Gift shop revenues [B] Pharmacy
[C] Surgery revenues [C] Miscellaneous supplies
[D] Parking revenues [D] Fixed overhead costs
1. Determine the total variance between the planned and actual budgets for Surgical Volume. Is the variance favorable or unfavorable? 2. Determine the total variance between the planned and actual budgets for Patient Days. Is the variance favorable or unfavorable?
Budgeted Actual Variance Variance
[E] Surgical volume [A] [E] Patient days [A]
[F] Gift shop revenues [B] [F] Pharmacy [B]
[G] Surgery revenues [C] [G] Miscellaneous supplies [C]
[H] Parking revenues [D] [H] Fixed overhead costs [D]
[I] Total variance [E] [I] Total variance
3. Determine the service related variance for Surgical Volume. 4. Determine the service related variance for Patient Days.
Variance Variance
[J] Total variance [I] [J] Total variance [I]
[K] Gift shop revenue variance [F] [K] Amt. explained by fixed overhead [H]
[L] Parking revenue variance [H] [L] Other fixed expenses
[M] Service-related variance [J-K-L] [M] Service-related variance [J-K-L]
5. Prepare a flexible budget estimate. Present side-by-side budget, flexible budget estimate, and the actual surgical revenues. 6. Prepare a flexible budget estimate. Present side-by-side budget, flexible budget estimate, and the actual patient expenses.
Budgeted Flexible Actual Budgeted Flexible Actual
[N] Surgical volume [A] [N] Patient days [A]
[O] Surgical revenue per unit [C / A] [O] Cost per patient day (Pharm + Misc) [B+C]/[A]
[P] Surgical revenue [C] [P] Total cost (Pharm+Misc) [N x O]
7. Determine what variances are due to change in volume and what variances are due to change in rates.
Budgeted Flexible Actual Variance
[Q] Budgeted surgical revenue [P]
[R] Flexible surgical revenue [P]
[S] Actual surgical revenue [P]
[T] Volume variance [R - Q]
[U] Rate variance [S - R]