Healthcare Finance (6th Edition) Chapter 8, Problem 4P

8.4 Refer to Carroll Clinics 2015 operating budget contained in the Exhibit 8.3 Instead of the actual results reported in Exhibit 8.3. Instead of the actual results reported in Exhibit 8.4, assume the results reported below

Carroll Clinic: New 2015 Results
I.	Volume:
	FFS	34,000	visits
	Capitated lives	30,000	members
	Number of actual	360,000
		0.12
	Number of visits	43,200	visits
	Total actual visits	77,2000	visits
II.	Revenues:
	FFS	$ 28	per visit
		x 34,000	actual visits
		$952,000
	Capitated lives	$2.75	PMPM
		x 360,000	actual member-month
		$990,000
	Total actual revenues	$1,942,000
III.	Costs:
	Variable Costs:
		$1,242,000	(46,000 hours at $27 /hour)
		126,000	(90,000 units at $1.40 / unit)
	Total variable costs	$1,368,000
	Variable cost per visit	$17.72	($1,368,000 / 77,200)
	Fixed Costs:
	Overhead, plant, and	$525,000
	Total actual costs	$1,893,000
IV.	Profits and Loss Statement:
		$952,000
		990,000
		$1,975,000
		$602,487
		765,513
		$1,368,000
	Contribution margin	$574,000
	Fixed costs	525,000
	Actual profit	$49,000

Construct Carrolls flexible budget for 2015.

What are the profit variance, revenue variance, and cost variance?

Consider the revenue variance. What is the component volume variance? The price variance?

Break down the cost variance into volume and management components.

Break down the management variance into labor, supplies, and fixed costs variance.

Interpret your results. In particular, focus on the differences between the variance analysis here and the Carroll Clinic illustration presented in the chapter.