Question

are the budgets of Brandon Surgery Center for the most recent historical quarter (in thousands of dollars): Simple Flexible Actual 1,300 $2,400$%2,600 $%2,535 1,200 $1,300 $1,365 $ 600 650 585 $ 600 650 585 Number of surgeries 1,200 1,300 Patient revenue Salary expense Nonsalary expense Profit The center assumes that all revenues and costs are variable and hence tied directly to patient volume. a. Explain how each amount in the flexible budget was calculated. (Hint: Exam- ine the simple budget to determine the relationship of each budget line to volume.) Determine the variances for each line of the P&L statement, both in dollar terms and in percentage terms. What do the results in part b tell Brandon's managers about the center's opera- tions for the quarter? b. c.

Answer 1

6.2)
a)	Simple	Flexible	Calculation
Number of surgeries	1200	1300
Patient revenue	$2,400	2600	2400*1300/1200
Salary expense	1200	1300	1200*1300/1200
Non-salary expense	600	650	600*1300/1200
Profit	600	650
b) Variances of the P&L Statement (in dollar & in percentage) :
	Actual	Flexible	Variance	Percentage
Number of surgeries	1300	1300
Patient revenue	$2,535	$2,600	65 U	-2.5
Salary expense	1365	1300	65 U	-5
Non-salary expense	585	650	65 F	10
Profit	585	650	65 U	-10
c) The manager of Brandon would able to get the result that
1. Charges from the patients would be appropriately charged. No discount
should be provided to patients.
2. The direct costs are required to be controlled which includes direct salaries.