For months 1-6

Expenses

Cost

Cost per patient

Staffing

59,400

22

Power

27,000

10

Supplies

54,000

20

Other

8,100

3

6000-2700 = 3300 expected number of patients from month 7-12

Budgeted variable cost

MONTHS 7-12 (3300) UNITS

Expenses

Cost

Cost per unit

Staffing

72600

22

Power

33000

10

Supplies

66000

20

Other

9900

3

Total

181,500

55

Budgeted fixed costs 6/12 budgeted cost

Per patient

Supervision

60000

Depreciation

93600

Other

32400

Total

186,000

56.36

Therefore total overhead cost per patient is = 55 + 56.36= 111.36

PART B.

Variable overhead( actual)

Variable overhead(budgeted)

Variance

203,300

181,500

21,800

Fixedoverhead( actual)

overhead(budgeted)

Variance

203,300

195,000

8,300

The main difference is 3800-3300 which is equal to 500 number of patients. However they could reduce the actual variable cost compared to the budgeted.

Actual variable cost per patient

Budgeted variable cost.

203,300/3800 = 53.5

55

Therefore control overhead cost is better than when compared to its budget.

Total actual cost per patient

Budgeted cost per patient

(195000 + 203300)/ 3800 = 104.82 per patient

111.36

Critically evaluate whether the nursing home exercised good or bad control over its overhead costs. In your explanation, also point out any limitations or assumptions of the current analysis. Advise the management about any additional data and analysis that they could perform to improve the accuracy of the planning and control of the overhead costs.