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 3,500 patients but actually treated 4,200 patients. The following additional information for October is available:

	Budget	Actual	Variance
Nurse-hours	1,400	1,764	-364
Nursing costs	$33,600	$32,200	$1,400
Supplies & other variable costs	$31,500	$25,900	$5,600
Fixed costs	$98,800	$107,500	$-8,700

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 _____

Answer 1

	Flexible budget	Actual	Flexible budget variance
Nursing cost	$42,336	$32,200	$10,136 F
Supplies and other variable cost	$37,800	$25,900	11,900 F
Fixed cost	$98,800	$107,500	-$8,700 U

Flexible budget nursing cost = ($33,600 / 1,400) X 1,764 = $42,336

Flexible budget Supplies and other variable cost = ($31,500 / 3,500) X 4,200 = $37,800