PROBLEM 8.7

Refer to problem 8.6. Chelsea Clinics actual results for 2020 are shown in the table below.

Total FFS Visit Volume	100,000 visits
Payer Mix: Blue Cross
Blue Cross	40%
Highmark	60%
Reimbursement Rates:
Blue Cross	$28 per visit
Highmark	$18 per visit
Variable Costs
Resource Inputs:
Labor	50,000 total hours
Supplies	150,000 total units
Resource Input Prices:
Labor	$28 per hour
Supplies	$1.50 per unit
Fixed Costs (overhead, plant and equipment)	500,000

1. Construct Chelsea Clinics flexible budget and actual operating results for 2020

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

3. Focus on the revenue side. What is the volume variance? The price variance?

4. Now consider the cost side. What are the volume and management variances? Break down the management variance into labor, supplies, and fixed costs variances.

5. Break down the labor and supplies variances into rate/price and efficiency/usage components

6. Interpret your results

8.6. Chelsea Clinic projected the following budget information for 2020 90,000 visits 40% 60% $25 per visit $20 per visit Total FFS Visit Volume Payer Mix: Blue Cross Highmark Reimbursement Rates: Blue Cross Highmark Variable Costs Resource Inputs: Labor Supplies Resource Input Prices: Labor Supplies Fixed Costs (overhead, plant, and equipment) 48,000 total hours 100,000 total units $25.00 per hour unit $500,000 $1.50 per Selo a. Construct Chelsea Clinic's operating budget for 2020. b. Discuss how each key budget assumption might result in a budget variance, and name the variance that would be used to examine results associated with each assumption. 0020 are