Question

Providence Hospital generates monthly performance reports for each of its departments. The hospital must maintain an adequate staff of attending and on-call physicians at all times, so physician costs are not affected by the number of patient visits. But all other costs do vary with patient activity. Nurse-hours are used as the activity measure for nursing costs, and patient visits are used as the activity measure for the cost of supplies and other variable costs.

The head physician of the hospital's emergency room, Yolanda Mortensen, is responsible for control of costs. During October, the emergency room unit expected to treat 3,900 patients but actually treated 4,000 patients. The following additional information for October is available:

Providence Hospital generates monthly performance reports for each of its departments. The hospital must maintain an adequate staff of attending and on-call physicians at all times, so physician costs are not affected by the number of patient visits. But all other costs do vary with patient activity. Nurse-hours are used as the activity measure for nursing costs, and patient visits are used as the activity measure for the cost of supplies and other variable costs. The head physician of the hospital's emergency room, Yolanda Mortensen, is responsible for control of costs. During October, the emergency room unit expected to treat 3,900 patients but actually treated 4,000 patients. The following additional information for October is available: Budget Actual Variance Nurse-hours 1,560 1,680 -120 Nursing costs $39,000 $30,300 $8,700 Supplies & other variable costs $42,900 $28,700 $14,200 Fixed costs $94,500 $91,200 $3,300 Required Compute the flexible-budget variances for each of the cost categories for October (NOTE: enter favorable variances as positive numbers and unfavorable variances as negative numbers): Nursing costs Supplies and other variable costs Fixed costs Submit Answer Tries 0/6

Answer 1

The flexible-budget variances for each of the cost categories for October: Flexible Actual Flexible budget budget budget variance (a) () (c=b-a) Nursing cost $30,300 $42.000 $11,700 F Supplies and other variable cost $28.700 $44.000 $15,300 F Fixed costs $91,200 $94,500 $3,300 F Workings: Activity rate for Nursing cost = $3,9000 / 1,560 $25 per nursing hour Flexible budget = 1,680 nursing hours * $25 per nursing hour = $42,000 Supplies and other variable cost = $42.900/3,900 patients $11 per patient Flexible budget = 4,000 patients * $11 per patient = $44.000 Flexible budget (Fixed Cost) = Same as Budget