Chapter 8:Financial Planning and Budgeting299Costs:Variable:FFS$ 602,487Capitated 765,513Total$1,368,000Contribution margin$ 574,000Fixed costs 525,000Actual profit$ 49,000a.Construct Carrolls flexible budget for 2015.b.What are the profit variance, revenue variance, and cost variance?c.Consider the revenue variance. What is the component volume variance? The price variance?d.Break down the cost variance into volume and management components.e.Break down the management variance into labor, supplies, and fixed costs variances.f.Interpret your results. In particular, focus on the differences between the variance analysis here and the Carroll Clinic illustration presented in the chapter.8.5Instead of the results in Problem 8.4, consider the results reported below: Carroll Clinic: New 2015 ResultsI.Volume:A.FFS 34,000visitsB.Capitated lives31,000membersNumber of member-months372,000Actual utilization per member-month 0.11613Number of visits 43,200visitsC.Total actual visits 77,200visitsII. Revenues:A.FFS$ 28per visit 34,000actual visits$ 952,000B.Capitated lives$ 2.75PMPM 372,000actual member-months$1,023,000C.Total actual revenues$1,975,000(continued)00_GapenskiReiter (2299).indb 29911/11/15 11:00 AMCopying and distribution of this PDF is prohibited without written permission. For permission, please contact Copyright Clearance Center at www.copyright.com Healthcare Finance300III. Costs:A.Variable Costs:Labor$1,242,000(46,000 hours at $27/hour)Supplies 126,000(90,000 units at $1.40/unit)Total variable costs$1,368,000Variable cost per visit$17.72($1,368,000 77,200)B.Fixed Costs:Overhead, plant,and equipment$ 525,000C.Total actual costs$1,893,000IV. Profit and Loss Statement:Revenues:FFS$ 952,000Capitated 1,023,000Total$1,975,000Costs:Variable:FFS$ 602,487Capitated 765,513Total$1,368,000Contribution margin$ 607,000Fixed costs 525,000Actual profit$ 82,000Refer to Problem 8.4. Assume the results reported in that problem hold, except that a difference existed among budgeted (static) enrollment and realized enrollment. The corrected results are presented above.a.Construct Carrolls flexible budgets for 2015. (Hint: Because of a change in enrollment, creating three flexible budgets is necessary. See the note to Exhibit 8.7.)b.What are the profit variance, revenue variance, and cost variance?c.Focus on the revenue side. What is the volume variance? The price variance? Break the volume variance into enrollment and utilization components. How does your answer here differ from your corresponding answer to Problem 8.4?d.Now consider the cost side. What are the volume and management variances? Break down the management variance into labor, supplies, and fixed costs variances.e.Interpret your results. In particular, focus on the differences between the variance analysis here and the one in Problem 8.4