1. Explain the three types of flexible budget variance and why it is important for every manager to understand these variables. 2. In one paragraph, present a practical application of Price Variance as a Manager. Use all appropriate formulae as necessary. 3. As the Manager of Walker Jones Memorial Hospital, you projected financial outcomes for 5 medical units in the hospital known for adding up to $ 30,000,000 all together of revenue to the hospital. The total cost of operating these units is $ 120,000 and a constant variable cost of $ 20,000. Consider that, at some point, each unit offered its regular patients lower medical costs of $ 30,000 off their bills. Calculate the Break-Even Number of Units. 4. From you answer above, prove that the operating income is 0 at break even. 5. As a manager, explain the implication of this outcome for the fiscal year.
1. Explain the three types of flexible budget variance and why it is important for every manager to understand these variables.
A static budget is a budget that does not change as volume changes. A flexible budget is a budget that changes when the level of activity changes.
A flexible budget variance = Actual amount - The amount allowed by the flexible budget. (Due to change in activity Ex- Volume Increase Decrease)
The three types of flexible budget variance are
• Basic flexible budget- The flexible budget alters
those expenses that vary directly with revenues.
• Intermediate flexible budget - The flexible budget alters other
expenditures apart from revenue
• Advanced flexible budget- There are ranges in this scenario.
Expenditures may only vary within certain ranges of revenue or
other activities. Outside of those ranges, a different proportion
of expenditures may apply.
It is important for every manager to understand these
variables because
• A flexible budget gives a company a tool for
comparing actual to budgeted performance at various levels of
activity.
• It is helpful when there is a cost dependency on level of
business activity
• As the budget is varied based on the activity level, tracking of
budget at a manager level gets easier.
2. In one paragraph, present a practical application of Price Variance as a Manager. Use all appropriate formulae as necessary.
There is a price variance occurs when there is a change in the number of units required to be purchased.
Price variance = (Actual cost incurred - standard
cost) x Actual quantity of units purchased
Example: A company ABC, at the beginning of Q2 forecasts it needs
5000 units of an item at a price of $2. Since it is purchasing 5000
units, it receives a discount of 10%, bringing the per unit cost
down to $1.8. However, turns out it only needs 3000 units of that
item. It does not receive the 10% discount it initially planned,
which brings the per unit cost to $2 and the price variance to
0.2$.
3. As the Manager of Walker Jones Memorial Hospital, you projected financial outcomes for 5 medical units in the hospital known for adding up to $ 30,000,000 altogether of revenue to the hospital. The total cost of operating these units is $ 120,000 and a constant variable cost of $ 20,000. Consider that, at some point, each unit offered its regular patients lower medical costs of $ 30,000 off their bills. Calculate the Break-Even Number of Units.
Operating cost= Fixed cost+ Variable cost
Fixed cost per unit = (120000 -20,000) =100000
Revenue per unit= $ 30,000,000/5 =$6,000,000
Variable cost per unit = $ 20000
Lowered cost= $ 30000
Breakeven point in units = Total Fixed cost / Revenue per unit- Variable cost per unit
= 100000/ (6000000- 20000-30000)
= $0.02
4. From you answer above, prove that the operating income is 0 at break even.
Operating income
5. As a manager, explain the implication of this outcome for the fiscal year.
1. Explain the three types of flexible budget variance and why it is important for every...
. As the Manager of Walker Jones Memorial Hospital, you projected financial outcomes for 5 medical units in the hospital known for adding up to $ 30,000,000 all together of revenue to the hospital. The total cost of operating these units is $ 120,000 and a constant variable cost of $ 20,000. Consider that, at some point, each unit offered its regular patients lower medical costs of $ 30,000 off their bills. Calculate the Break-Even Number of Units. 4. From...
Budgeting and Variance Analysis In an effort to better plan for and control OR costs, SHH management asked Jack to calculate the flexible budget variance (i.e., flexible budget costs - actual costs) for OR nursing costs, including the price variance and efficiency variance. Given that Jack is interested in comparing the reported costs of both systems, he decided to prepare the requested OR variance analysis for both the current cost system and the vital-signs costing system. In addition, Jack chose...
1. Prepare the flexible budget using the information provided.
Show calculations/explain where the numbers come from.
2. Answer the corresponding questions about the variances of the
budget.
Class Exercise for Standard Cost BUDGET 10,000 FLEXIBLE Units of output planned and actual ACTUAL 9,000 Direct material units per unit of output units price Labor units per unit of output hours rate Sales 300,000 306,000 Less variable costs of manufacturing Direct Material Direct Labor Factory Overhead Total 120,000 40,000 60,000 220,000 117,000...
Questions 1. Using budget data, how many motors would have to be sold for Waltham Motors Division to break even? 2. Using budget data, what was the total expected cost per unit if all manufacturing and shipping overhead (both variable and fixed) was allocated to planned production? What was the actual per unit cost of production and shipping? 3. Comment on the performance report and the plant accountant's analysis of results. How, if at all, would you suggest the performance...
St. Francis Assisted Living Facility St. Francis Medical Center, a 450 bed rehabilitation non-profit hospital began to see a significant decline in admissions. St. Francis' mission focuses on inpatient and outpatient rehabilitation of the severely injured and catastrophically ill. While the patient census varied from month to month, it appeared to the St. Francis Board of Trustees that the inpatient population was slowly but steadily declining. The hospital's market researchers reported that fewer people were being severely injured due to...
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I need help with my very last assignment of this term
PLEASE!!, and here are the instructions: After reading Chapter Two,
“Keys to Successful IT Governance,” from Roger Kroft and Guy
Scalzi’s book entitled, IT Governance in Hospitals and Health
Systems, please refer to the following assignment instructions
below.
This chapter consists of interviews with executives
identifying mistakes that are made when governing healthcare
information technology (IT). The chapter is broken down into
subheadings listing areas of importance to understand...