Use the following information to answer the following three questions. At the end of March, the HIM Department has a YTD payroll budget of $300,000. However, the actual YTD amount is $292,500 because a coder left at the end of January. For the past two months, the position has been filled through outsourcing. Therefore the actual YTD amount for consulting services is $12,000, although no money was budgeted for consulting services. The reporting threshold for monthly variances is 4%. The fiscal year-end is December.

1. What is the best description of the payroll variance?

a. Favorable, permanent

b. Unfavorable, permanent

c. Favorable, temporary

d. Unfavorable, temporary

2. What is the best description of the consulting services variance?

a. Favorable, permanent

b. Unfavorable, permanent

c. Favorable, temporary

d. Unfavorable, temporary

3. Which one of the variances will the HIM director be required to explain?

a. Only the consulting services variance

b. Only the payroll variance

c. Both the payroll and consulting services variance

d. Neither because the two variances cancel each other out