Detailed variance analysis. The administrator of Break-a-Leg Hospital is very aware of the need to keep his cost down, since he just negotiated a new capitated arrangement with a large insurance company. The following are selected planned and actual expenses for the previous month.

a. Determine the total variance associated with the planned and actual expenses.

b. Calculate the amount of unexplained variance and give a possible reason for the change in fixed expenses.

c. Prepare a flexible expense estimate for variable costs. Compare budget, flexible budget, and actual (show related volumes).

d. Determine what variance is due to change in volume and what variance is due to change in rates.

e. Determine the volume variance and rate variance based on per unit rates.

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Planned Actual Patient days Pharmacy 24,000 30,000 $100,000 $140,000 Miscellaneous supplies $56,000 $67,500 Fixed overhead costs $708,000 $780,000