Question

Problem 1

Tallahassee Clinic projected the following budget information for 2018:

Total FFS Visit Volume	90,000 visits
Payer Mix:
Blue Cross	40%
Celtic Insurance Company	60%
Reimbursement Rates:
Blue Cross	$25 per visit
Celtic Insurance Company	$20 per visit
Variable Costs – Resource Inputs:
Labor	48,000 total hours
Supplies	100,000 total units
Variable Costs – Input Prices:
Labor	$25 per hour
Supplies	$1.50 per unit
Fixed Costs (overhead, plant, and equipment)	$500,000

Construct Tallahassee Clinic’s static operating budget for 2018. (See Exhibit 8.3, page 283. Note that there are four components that need to be included: Volume Assumptions, Revenue Assumptions, Cost Assumptions, and the Pro Forma Profit and Loss or P&L projected Statement.)

Problem 2

Refer to Problem 1 above. Tallahassee Clinic’s actual results for 2018 are shown in the table below:

Total FFS Visit Volume	100,000 visits
Payer Mix:
Blue Cross	40%
Celtic Insurance Company	60%
Reimbursement Rates:
Blue Cross	$28 per visit
Celtic Insurance Company	$18 per visit
Variable Costs – Resource Inputs:
Labor	50,000 total hours
Supplies	150,000 total units
Variable Costs – Input Prices:
Labor	$28 per hour
Supplies	$1.50 per unit
Fixed Costs (overhead, plant, and equipment)	$500,000

a. Construct Tallahassee Clinic’s flexible budget for 2018 and actual operating results for 2018. (Hint: place the three budgets side by side. See Exhibits 8.4 and 8.5).

b. What is the profit variance?

c. Wat is the revenue variance?

d. What is the cost variance?

e. Focus on the revenue side. What is the volume variance?

f. Focus on the revenue side. What is the price variance?

g. Focus on the cost side. What is the volume variance?

h. Focus on the cost side. What is the management variance?

3393000 what the volume level is On ner, the $100 009 m

I ONLY NEED THE ANSWERS TO PROBLEM 2 BUT IT REFERENCED PROBLEM 1

Answer 1

(a) statement showing flexible budget and its comparison with actual

	Static budget for 90000 visits	flexible budget (at standard cost ) per unit	flexible budget (at standard cost ) for 100000 visits	Actual for 100000 visits	variance
sales	4050000	45 $	4500000	4600000	100000 A
Direct material	150000	1.5 per unit	225000	225000	-
Direct labor	100000	25 per hour	1250000	1400000	150000 A
Variable overheads	-	-	-	-	-
Total variable cost	1150000	26.5	1475000	1625000	-
Contribution	1100000	18.5	1850000	2975000	-
Fixed cost	500000	5.56	500000	500000	-
Net profit	600000	12.94	1350000	2475000	1125000 A

(b) Profit variance

standard profit (budgeted visits - actual visits) = 12.94(90000-100000)=12.94*10000=129400 F

(c) revenue variance

price per visit * Budgeted visits- Price per visit * actual visits= (45*90000) - (46*100000) = 550000 F

(d) cost variance

actual cost = variable cost + fixed cost = 1625000+500000=2125000

budgeted cost = variable cost + fixed cost =1475000+500000=1975000

actual cost -budgeted cost = 150000 A

(e) volume variance of  revenue side = budgeted price (actual visits - budgeted visits ) = 45(100000-90000) = 450000

(f) price variance of revenue side = actual visits (actual price - budgeted price ) = 100000(46-45) = 100000 F

(g) volume variance from cost side =

• variable overheads = 0
• fixed overheads expenditure variance = budgeted fixed overheads - actual fixed overheads = 500000-500000 = 0
• fixed overheads volume variance= standard fixed overheads - budgeted fixed overheads = 556000-500000 = 56000 F
• fixed volume variance = fixed overheads expenditure variance + fixed overheads volume variance = 56000 F