64 Again refer to Carroll Clinic's 2016 operating budget, contained in exhibit 6.2. Instead of the actual results reported in exhibit 6.3 or listed in problem 6.3, assume 183 these results: 8.500 11,000 19.500 Carroll Clinic: New 2016 Results 1. Volume (Number of Visits) Payer A Payer B Total II. Reimbursement (per Visit) Payer A Payer B III. Costs Variable Costs: Supplies Fixed Costs: Labor Overhead Total $ $ 90 80 $ 320,000 $1,050,000 550,000 $1,600,000 23 IV. P&L Statement Revenues: Payer A Payer B Total revenues Variable costs Fixed costs Total $ 765,000 880,000 $1,645,000 - $ 320,000 1,600,000 $1,920,000 - ($ 275,000 Profit a. What are the profit, revenue, and cost variances based on the simple (exhibit 6.2) budget? b. Construct Carroll's flexible budget for 2016. What are the profit, revenue, and cost variances based on the flexible budget? d. Interpret your results. In particular, focus on the differences between the vari- ance analysis here and the Carroll Clinic illustration presented in the chapter and in problem 6.3. Sabri Case Study Sabri Spa offers a variety of skin treatments and spa services, including massages, facials, body treatments, and manicures. The spa is owned by the largest dermatology practice in town, and the doctors invested $450,000 to start the spa five years ago. The spa is in its own building next to the clinic, and it has its own staff and management, so almost all of the spa's costs are direct costs. The average one-hour treatment is priced at $100. Sabrri has the following cost structure: Variable Cost per Treatment $40 4 Fixed Cost per Month Therapist Supplies Management Laundry Utilities Rent Repairs/cleaning Total $5,500 1,400 6,000 1,500 SY 7 6 $57 Assume that all treatments have the same variable cost structure depicted in the table. Please complete the following parts (Each item is worth 5 points; you must show your work!): A. The costs in the table above are all direct costs associated with the spa, except laundry. The spa and clinic use shared laundry services. The total monthly budget for laundry services is $300. The cost driver is laundry loads, and the laundry services budget is based on 75 loads of laundry for the spa and clinic combined. The spa's budget should be based on their anticipated use of 50 loads of laundry per month. Determine the amount of laundry cost per month that the spa should budget, and put the number in for "X" in the table above. Then, add up the fixed cost column and put in a number for "Y" in the table above. B. Calculate the number of treatments Sabrri must perform each month in order to break even. C. In April, the therapists are expected to perform 550 treatments. Prepare a budget for April assuming 550 treatments are given. D. Assume some time has passed, and actual results for April are available. The spa actually performed 530 treatments and incurred the following actual costs. Prepare a variance analysis for April comparing actual performance to the simple budget based on 550 treatments that you created in Part C. Actual Operating Results for April $53,000 Revenue Therapists Supplies Management Laundry $21,280 1,795 5,125 220 Page 2 of 2 Utilities Rent Repairs/cleaning Total Expenses Actual Profit 1,505 9,710 5,080 $44,715 8,285 E. Explain and interpret the simple variance analysis results that you just determined. F. Prepare a variance analysis for April comparing actual performance to a flexible budget based on the actual number of treatments performed in April of 530 treatments, G. Explain and interpret the flexible variance analysis results that you just calculated. H. Do the break-even calculation you performed in Part B and the budgeted and actual profits computed in Parts C, D, and Faccurately capture the true economics of Sabrri, especially from the perspective of the doctors who invested in the spa? Explain why or why not