Question:

Budgeting is an important activity within every health care organization. The particular challenges encountered, however, can vary depending on the type of organization. A state or federally funded organization, for example, will likely have a budget that is allocated to it, and it needs to follow specific guidelines on how the money can be used. A for-profit organization, by contrast, will typically have more influence and flexibility in setting up its budget and making choices on matters such as how much to spend on marketing, patient care, or incentives for employees.

In addition to preparing budgets, as a health care administrator, you must also be able to evaluate whether or not you have achieved your budget using variance analysis. This is important because variance analysis measures the differences between the budget and actual results, and provides administrators with a starting point for correcting financial performance. For this Assignment, you conduct a variance analysis for a health care organization.

To prepare for this Assignment:

Review the Week 9 Assignment document provided to you by the Instructor. Examine the budgeted and actual revenues and expenses for a hospital. Reflect on concepts of budgeting and variance. Refer to Chapter 10 and Chapter 11 ofFinancial Management of Health Care Organizations: An Introduction to Fundamental Tools, Concepts and Applicationsin this week's Learning Resources for additional guidance.

Note:This Assignment will be graded using this rubric:Document:Week 9 Assignment Rubric (Word document)

The Assignment:

Using the "Week 9 Assignment Budget and Variance Excel Template" address the following:

1. Determine the total variance between the planned and actual budgets forSurgical Volume. Is the variance favorable or unfavorable?
2. Determine the total variance between the planned and actual budgets forPatient Days. Is the variance favorable or unfavorable?
3. Determine the service-related variance forSurgical Volume.
4. Determine the service-related variance forPatient Days.
5. Prepare a flexible budget estimate. Present a side-by-side budget, flexible budget estimate, and the actualSurgical Revenues.
6. Prepare a flexible budget estimate. Present a side-by-side budget, flexible budget estimate, and the actualPatient Expenses.
7. Determine what variances are due to change in volume and what variances are due to change in rates.

Your Assignment is due by Day 7.

Healthcare Financial Management and Economics Week 9 Assignment Budgeting and Variance Analysis Instructions: The following are budgeted and actual revenues and expenses for a hospital. Budgeted Actual Revenues Surgical Volume 2,600 2,750 Gift Shop Revenues $19,500 $22,000 Surgery Revenues $602,500 $750,000 Parking Revenues $17,000 $19,000 Patients Days 29,000 27,500 Pharmacy $120,500 $147,000 Misc Supplies $695,000 $786,000 Fixed Overhead Costs $836,000 $887,000 Expenses Using an Excel spreadsheet to show your calculations: 1. Determine the total variance between the planned and actual budgets for Surgical Volume. Is the variance favorable or unfavorable? 2. Determine the total variance between the planned and actual budgets for Patient Days. Is the variance favorable or unfavorable? 3. Determine the service-related variance for Surgical Volume. 4. Determine the service-related variance for Patient Days. 5. Prepare a flexible budget estimate. Present a side-by-side budget, flexible budget estimate, and the actual Surgical Revenues. 6. Prepare a flexible budget estimate. Present a side-by-side budget, flexible budget estimate, and the actual Patient Expenses. 7. Determine what variances are due to change in volume and what variances are due to change in rates. 2015 Laureate Education, Inc. Page 1 of 1 Revenues [A] [B] [C] [D] Givens: Surgical volume Gift shop revenues Surgery revenues Parking revenues Budgeted Actual 1. Determine the total variance between the planned and actual budgets for Surgical Volume. Is the variance favorable or unfavorable? Budgeted Actual Variance [E] Surgical volume [A] [F] Gift shop revenues [B] [G] Surgery revenues [C] [H] Parking revenues [D] [I] Total variance [E] 3. Determine the service related variance for Surgical Volume. Variance [J] [K] [L] [M] Total variance [I] Gift shop revenue variance [F] Parking revenue variance [H] Service-related variance [J-K-L] 5. Prepare a flexible budget estimate. Present side-by-side budget, flexible budget estimate, and the actual surgical revenues. Budgeted Flexible Actual [N] Surgical volume [A] [O] Surgical revenue per unit [C / A] [P] Surgical revenue [C] 7. Determine what variances are due to change in volume and what variances are due to change in rates. Budgeted [Q] [R] [S] [T] [U] Budgeted surgical revenue [P] Flexible surgical revenue [P] Actual surgical revenue [P] Volume variance [R - Q] Rate variance [S - R] Flexible Actual Expenses [A] [B] [C] [D] ume. Is the variance Givens: Patient days Pharmacy Miscellaneous supplies Fixed overhead costs Budgeted Actual 2. Determine the total variance between the planned and actual budgets for Patient Days. Is the variance fa unfavorable? [E] [F] [G] [H] [I] Patient days [A] Pharmacy [B] Miscellaneous supplies [C] Fixed overhead costs [D] Total variance 4. Determine the service related variance for Patient Days. [J] [K] [L] [M] te, and the actual change in rates. Variance Total variance [I] Amt. explained by fixed overhead [F] Other fixed expenses Service-related variance [J-K-L] 6. Prepare a flexible budget estimate. Present side-by-side budget, flexible budget estimate, and the actual p expenses. Budgeted Flexible [N] Patient days [A] [O] Cost per patient day (Pharm + Misc) [B+C]/[A] [P] Total cost (Pharm+Misc) [N x O] nt Days. Is the variance favorable or Variance Variance estimate, and the actual patient Actual