Mental Health provides counseling and stress management programs for overworked students.

Fixed costs are: rent for the building (that includes utilities and maintenance); and the Director's salary. These total $20,000 per month.

Each counseling session uses 60 minutes of therapist time and $3 in materials. Each stress management session uses 20 minutes of trainer time and $3 in materials.

Mental Health hires therapists and trainers on a freelance contract bases and does not provide them any benefits. The hourly wage rate for therapists is $40 per hour and stress management trainers is $30 per hour. They are paid for actual services rendered.

At the end of December 2019, the Director projected they would sell 1000 counseling sessions at $120 each and 10,000 stress management sessions at $25 each in 2020.

A) Complete The Here For You Clinic Annual Static (Projected) Budget for 2020 below

Revenue

Total Cost

Profit

Revenue Breakdown

Counseling Services

Stress Management Services

Cost Breakdown

         Fixed cost

Counselor services

Stress Management Trainer Services

          Supplies

Jump into your time machine and fast forward to December 31. As 2020 comes to a close, the director sees that they actually provided 1000 counseling services. 100 of those services were provided during their “Holidays in July” promotion offering the sessions for $75 each. The remainder were sold at full price.

Actually provided 12,500 stress reduction sessions. 4,000 of these were sold during the July promotion at $15 each. The remainder were sold at $25.

Therapist and stress trainer contracted hourly rates remained the same throughout the year. The spending on fixed costs were exactly as projected.

B)   What is Mental Health's flexible budget amount for: revenue, fixed cost, supplies, counselors, and stress trainers?

C) What is Mental Health's actual revenue, total cost, variable cost and profit?

D) Examine the Revenue Variance. What is the total Revenue Variance? What is the Revenue Price Variance? What is the Revenue Volume Variance?

E) Examine the Cost variance. What is the total Cost Variance? Of the Variable Cost variance, what is the Volume variance and what is the Management variance?

F) Interpret Mental Health's budget variance results for 2020. What contributed most to the change in profit? What recommendations would you make for 2021?