Create a table that calculates total actual cost, total standard cost (flexible budget cost), and the total cost variance for each of the following costs: Physician Care, Nursing Care, Medical Supplies, and Laboratory. Note for medical supplies and laboratory tests, assume purchases = usages
and B Maria Delgado, the Director of Finance of El Conejo Family Planning Clinic, recently had re- ceived a memorandum from the Chairman of the Finance Committee of the Clinic's Board of Trus tees. The memorandum also had been sent to all department heads, and had expressed concern that the results of the year's operations were considerably worse than budgeted. One reason for this problem was that third parties had lowered their rate for one of the Clinic's most significant visit types, but there appeared to be some other explanations as well. Ms. Delgado had been asked to analyze the reasons for the poor performance, meet with the relevant department heads, and make a presentation at the next board meeting concerning the Clinic's performance. In reviewing the budgeted and actual results, Ms. Delgado discovered that almost all of the Clinic's variation from its budget could be attributed to four visit types and four services. For rea- sons of simplicity, she decided to base her presentation on these only. Exhibit contains the original budget for these four visit types: IUD, first visit; oral contracep tive, first visit: special follow-up visits (when problems existed with the contraceptive or contracep tive method): and routine follow-up. It also shows the budgeted variable expenses per visit for the four services: physician care, nursing care, medical supplies, and laboratory tests. As Exhibit i indicates, the Clinic was paid on a per-visit basis. Its anticipated revenue for each visit type is shown in Exhibit 1, as is the anticipated utilization of services and the variable expense per unit for each service for each visit type. Using these estimates, the total variable expense per visit for each visit type was calculated. The revenue and total variable expense per visit were then multiplied by the anticipated number of visits to give total revenue and total variable expenses by visit The latter was deducted from total revenue to give the contribution to fixed expenses from each visit type. The fixed expenses were then deducted from the total contribution to give a total budgeted surplus of $85,000 for the accounting period. Ms. Delgado asked her stall assistant, Asher Hawkins, to use the actual data for the period, shown in Exhibit 2, as the basis for a report on results for the year. This report was to contain a complete breakdown of the reasons why the Clinic's actual surplus diverged from the budgeted one. The report would be submitted to the Clinic's chief executive officer, and would be used by Ms. Delgado for her presentation to the Board of Trustees. Mr. Hawkins began by using the data from Exhibit 2 to compute the actual financial results for the period (Exhibit 3), which showed that, instead of earning a surplus, the Clinic actually had in curred a deficit of $218,300. Then, reasoning that the Clinic had essentially no control over the number or type of visits seen, he also prepared a flexible budget (Exhibit 4), which showed that $750 of the difference was due exclusively to the change in the number of visits seen in the Clinic Using similar reasoning, he prepared an analysis of the variance due to the changes in the third- party reimbursement rates (shown at the bottom of Exhibit 4), which showed that $17.000 of the difference was a result of these rate changes. Having analyzed and explained only $17.750 of the $303,300 total difference between budg- cted and actual performance, Mr. Hawkins met with Ms. Delgado to show her the results of his work. Ms. Delgado explained to Mr. Hawkins that he needed to look into matters such as physi- cian and nursing productivity and wage rates, medical supply costs and laboratory costs. She asked Mr. Hawkins to assess these other reasons why actual results might have diverged from the budget, and to prepare a variance analysis that would explain each of them. due es also prewing that in camin EL CONEJO FAMILY PLANNING CLINIC Exhibit 3. Actual Results with Calculations Overall Results Actual number of visits Actual price per visit Total revenue IUD Ist Visit 2.750 S200.00 $550,000 Oral Cone 1st Visit 2.200 $90.00 $198.000 Special Follow-Up 1000 S130.00 $130.000 Follow-Up 600 S40.00 $24,000 Total 62350 $902.000 $218.00 $599 500 ($49.300) $114.00 $250.800 ($52.800) S161.00 $161.000 (531,000) $15.00 $9.000 $15.000 1,020,300 ($118.300) 100.000 (S218.300) 25 $1.20 $30.00 $1.20 $6.00 $1.20 $24.00 $1.20 $12.00 Actual variable expenses per visit Total variable expenses Contribution Total fixed expenses Surplus Variable expense detail: Physician care Average minutes per visit Average wage per minute Total expense per visit Nursing care Average #minutes per visit Average wage per minute Total expense per visit Medical Supplies Average 8 units per visit Average expense per unit Total expense per visit Laboratory Average tests per visit Average expense per test Total expense per visit Total average variable expense per visit 25 40 $0.60 $24.00 30 $0.60 $18.00 $0.60 $15.00 S0.60 53.00 $21.00 $84.00 $21.00 $42.00 S2100 $42.00 $21.00 $0.00 $16.00 $80.00 $16.00 $48.00 $16.00 $80.00 $16.00 $0.00 $218.00 $114.00 $161.00 $15.00 Exhibit 4. Flexible Budget and Related Variances Special Follow-Up IUT Ist Visit 2,750 $200.00 S550.000 Overall Budget Actual number of visits Budgeted price per visit Total revenue Oral Cone Ist Visit 2.200 $100.00 $220.000 TAXO Total 6,550 S125.00 $125.000 Follow-Up 600 $40.00 S24.000 $919,000 $165.00 $453.750 596,250 $75.00 S165.000 $55.000 $110.00 S110,000 $15.000 $10.00 $6,000 S18.000 734.750 S184.250 100.000 $84.250 100 -250 S200.00 (S50.000) 200 S100.00 $20.000 $125.00 $40.00 $4.000 ($26.000) Budgeted variable expenses per visit Total variable expenses Contribution Total fixed expenses Surplus Revenue Volume Variance Actual-Budgeted visits Budgeted price per visit Variance Expense Volume Variance Budgeted-Actual visits Budgeted expense per visit Variance Contribution Margin Variance Revenue Volume Variance + Expense Volume Variance Revenue Price Variances Actual-Budgeted price per visit Actual number visits Revenue price variance 250 -200 S75.00 (SI5.000) $165.00 S41.250 SI10.00 -100 S10.00 ($1,000) $25,250 ($8,750) $5,000 $3,000 (S750) S0.00 2.750 $0 ($10.00) 2.200 (S22,000) $5.00 1.000 $5.000 S0.00 600 SO ($17.000) EL CONEJO FAMILY PLANNING CLINIC Exhibit 1 Original Budget Overall Budget Number of visits Price per visit Total revenue 1st Visit 3.000 $200.00 $600.000 Oral Cone 1st Visit 2.000 $100.00 S200.000 Special Follow-Up 1.000 S125.00 $125,000 Routine Follow-Up 500 $40.00 $20.000 Total 6,500 $945,000 Variable expenses per visit Total variable expenses Contribution Total fixed expenses Surplus $165.00 $495.000 S105,000 $75.00 $150.000 $50,000 $110,00 $110.000 $15,000 $10.00 $5,000 $15,000 760.000 $185.000 100.000 $85,000 10 30 $1.00 $30.00 $1.00 $10.00 15 $1.00 $15.00 $1.00 $5.00 30 $0.50 20 $0.50 $10.00 $15.00 $0.50 $15.00 $0.50 SS.CO Variable expense detail: Physician care Average #minutes per visit Average wage per minute Total expense per visit Nursing care Average #minutes per visit Average wage per minute Total expense per visit Medical Supplies Average #units per visit Average expense per unit Total expense per visit Laboratory Average i tests per visit Average expense per test Total expense per visit Total average variable expense per visit 0 $25.00 $75.00 $25.00 $25.00 $25.00 $50.00 $25.00 $0.00 $15.00 $45.00 $15.00 $30.00 S15,00 $30.00 $15.00 S0.00 S165.00 $75.00 $110.00 $10.00 Exhibit 2. Actual Results IUD 1st Visit 2.750 $200.00 Oral Cone Ist Visit 2,200 $90.00 Special Follow-Up 1,000 $130,00 Follow-Up 600 $40.00 Total 6,550 100,000 25 20 $1.20 10 $1.20 Overall Results Actual number of visits Actual price per visit Total fixed expenses Variable expense detail: Physician care Average #minutes per visit Average wage per minute Nursing care Average #minutes per visit Average wage per minute Medical Supplies Average units per visit Average expense per unit Laboratory Average tests per visit Average expense per test $1.20 40 $0.60 5 $1.20 30 $0.60 25 $0.60 5 $0.60 $21.00 $21.00 $21.00 $21.00 0 5 $16.00 $16.00 S16,00 $16.00 and B Maria Delgado, the Director of Finance of El Conejo Family Planning Clinic, recently had re- ceived a memorandum from the Chairman of the Finance Committee of the Clinic's Board of Trus tees. The memorandum also had been sent to all department heads, and had expressed concern that the results of the year's operations were considerably worse than budgeted. One reason for this problem was that third parties had lowered their rate for one of the Clinic's most significant visit types, but there appeared to be some other explanations as well. Ms. Delgado had been asked to analyze the reasons for the poor performance, meet with the relevant department heads, and make a presentation at the next board meeting concerning the Clinic's performance. In reviewing the budgeted and actual results, Ms. Delgado discovered that almost all of the Clinic's variation from its budget could be attributed to four visit types and four services. For rea- sons of simplicity, she decided to base her presentation on these only. Exhibit contains the original budget for these four visit types: IUD, first visit; oral contracep tive, first visit: special follow-up visits (when problems existed with the contraceptive or contracep tive method): and routine follow-up. It also shows the budgeted variable expenses per visit for the four services: physician care, nursing care, medical supplies, and laboratory tests. As Exhibit i indicates, the Clinic was paid on a per-visit basis. Its anticipated revenue for each visit type is shown in Exhibit 1, as is the anticipated utilization of services and the variable expense per unit for each service for each visit type. Using these estimates, the total variable expense per visit for each visit type was calculated. The revenue and total variable expense per visit were then multiplied by the anticipated number of visits to give total revenue and total variable expenses by visit The latter was deducted from total revenue to give the contribution to fixed expenses from each visit type. The fixed expenses were then deducted from the total contribution to give a total budgeted surplus of $85,000 for the accounting period. Ms. Delgado asked her stall assistant, Asher Hawkins, to use the actual data for the period, shown in Exhibit 2, as the basis for a report on results for the year. This report was to contain a complete breakdown of the reasons why the Clinic's actual surplus diverged from the budgeted one. The report would be submitted to the Clinic's chief executive officer, and would be used by Ms. Delgado for her presentation to the Board of Trustees. Mr. Hawkins began by using the data from Exhibit 2 to compute the actual financial results for the period (Exhibit 3), which showed that, instead of earning a surplus, the Clinic actually had in curred a deficit of $218,300. Then, reasoning that the Clinic had essentially no control over the number or type of visits seen, he also prepared a flexible budget (Exhibit 4), which showed that $750 of the difference was due exclusively to the change in the number of visits seen in the Clinic Using similar reasoning, he prepared an analysis of the variance due to the changes in the third- party reimbursement rates (shown at the bottom of Exhibit 4), which showed that $17.000 of the difference was a result of these rate changes. Having analyzed and explained only $17.750 of the $303,300 total difference between budg- cted and actual performance, Mr. Hawkins met with Ms. Delgado to show her the results of his work. Ms. Delgado explained to Mr. Hawkins that he needed to look into matters such as physi- cian and nursing productivity and wage rates, medical supply costs and laboratory costs. She asked Mr. Hawkins to assess these other reasons why actual results might have diverged from the budget, and to prepare a variance analysis that would explain each of them. due es also prewing that in camin EL CONEJO FAMILY PLANNING CLINIC Exhibit 3. Actual Results with Calculations Overall Results Actual number of visits Actual price per visit Total revenue IUD Ist Visit 2.750 S200.00 $550,000 Oral Cone 1st Visit 2.200 $90.00 $198.000 Special Follow-Up 1000 S130.00 $130.000 Follow-Up 600 S40.00 $24,000 Total 62350 $902.000 $218.00 $599 500 ($49.300) $114.00 $250.800 ($52.800) S161.00 $161.000 (531,000) $15.00 $9.000 $15.000 1,020,300 ($118.300) 100.000 (S218.300) 25 $1.20 $30.00 $1.20 $6.00 $1.20 $24.00 $1.20 $12.00 Actual variable expenses per visit Total variable expenses Contribution Total fixed expenses Surplus Variable expense detail: Physician care Average minutes per visit Average wage per minute Total expense per visit Nursing care Average #minutes per visit Average wage per minute Total expense per visit Medical Supplies Average 8 units per visit Average expense per unit Total expense per visit Laboratory Average tests per visit Average expense per test Total expense per visit Total average variable expense per visit 25 40 $0.60 $24.00 30 $0.60 $18.00 $0.60 $15.00 S0.60 53.00 $21.00 $84.00 $21.00 $42.00 S2100 $42.00 $21.00 $0.00 $16.00 $80.00 $16.00 $48.00 $16.00 $80.00 $16.00 $0.00 $218.00 $114.00 $161.00 $15.00 Exhibit 4. Flexible Budget and Related Variances Special Follow-Up IUT Ist Visit 2,750 $200.00 S550.000 Overall Budget Actual number of visits Budgeted price per visit Total revenue Oral Cone Ist Visit 2.200 $100.00 $220.000 TAXO Total 6,550 S125.00 $125.000 Follow-Up 600 $40.00 S24.000 $919,000 $165.00 $453.750 596,250 $75.00 S165.000 $55.000 $110.00 S110,000 $15.000 $10.00 $6,000 S18.000 734.750 S184.250 100.000 $84.250 100 -250 S200.00 (S50.000) 200 S100.00 $20.000 $125.00 $40.00 $4.000 ($26.000) Budgeted variable expenses per visit Total variable expenses Contribution Total fixed expenses Surplus Revenue Volume Variance Actual-Budgeted visits Budgeted price per visit Variance Expense Volume Variance Budgeted-Actual visits Budgeted expense per visit Variance Contribution Margin Variance Revenue Volume Variance + Expense Volume Variance Revenue Price Variances Actual-Budgeted price per visit Actual number visits Revenue price variance 250 -200 S75.00 (SI5.000) $165.00 S41.250 SI10.00 -100 S10.00 ($1,000) $25,250 ($8,750) $5,000 $3,000 (S750) S0.00 2.750 $0 ($10.00) 2.200 (S22,000) $5.00 1.000 $5.000 S0.00 600 SO ($17.000) EL CONEJO FAMILY PLANNING CLINIC Exhibit 1 Original Budget Overall Budget Number of visits Price per visit Total revenue 1st Visit 3.000 $200.00 $600.000 Oral Cone 1st Visit 2.000 $100.00 S200.000 Special Follow-Up 1.000 S125.00 $125,000 Routine Follow-Up 500 $40.00 $20.000 Total 6,500 $945,000 Variable expenses per visit Total variable expenses Contribution Total fixed expenses Surplus $165.00 $495.000 S105,000 $75.00 $150.000 $50,000 $110,00 $110.000 $15,000 $10.00 $5,000 $15,000 760.000 $185.000 100.000 $85,000 10 30 $1.00 $30.00 $1.00 $10.00 15 $1.00 $15.00 $1.00 $5.00 30 $0.50 20 $0.50 $10.00 $15.00 $0.50 $15.00 $0.50 SS.CO Variable expense detail: Physician care Average #minutes per visit Average wage per minute Total expense per visit Nursing care Average #minutes per visit Average wage per minute Total expense per visit Medical Supplies Average #units per visit Average expense per unit Total expense per visit Laboratory Average i tests per visit Average expense per test Total expense per visit Total average variable expense per visit 0 $25.00 $75.00 $25.00 $25.00 $25.00 $50.00 $25.00 $0.00 $15.00 $45.00 $15.00 $30.00 S15,00 $30.00 $15.00 S0.00 S165.00 $75.00 $110.00 $10.00 Exhibit 2. Actual Results IUD 1st Visit 2.750 $200.00 Oral Cone Ist Visit 2,200 $90.00 Special Follow-Up 1,000 $130,00 Follow-Up 600 $40.00 Total 6,550 100,000 25 20 $1.20 10 $1.20 Overall Results Actual number of visits Actual price per visit Total fixed expenses Variable expense detail: Physician care Average #minutes per visit Average wage per minute Nursing care Average #minutes per visit Average wage per minute Medical Supplies Average units per visit Average expense per unit Laboratory Average tests per visit Average expense per test $1.20 40 $0.60 5 $1.20 30 $0.60 25 $0.60 5 $0.60 $21.00 $21.00 $21.00 $21.00 0 5 $16.00 $16.00 S16,00 $16.00
