Variance Analysis Project

6. You have been asked to explain the causes for a change in the charges for MS-DRG 445 from 2006 to 2011. Charge profiles are presented below:

Units Provided Charge/Unit Total Charge

2006 2011 2006 2011 2006 2011

Routine Care 10 7 $200 $400 $2,000 $2,800

Special Care 2 1 400 560 800 560

Pharmacy 1 1 95 125 95 125

Radiology 9 1 65 585 585 585

CT Scan 0 1 300 300 0 300

Lab 1 1 185 185 185 185

$3,665 $4,555

Compute price and efficiency variances for all departments.

Use the following data to calculate the variances in problems 710.

You have been asked by management to explain the variances in costs under your inpatient capitated contract. The following data is provided.

Budget Actual

Inpatient Costs $12,568,500 $16,618,350

Members 42,000 42,000

Admission Rate 0.070 0.095

Case Mix Index 0.90 0.85

Cost per Case (CMI = 1.0) $4,750 $4,900

7. What dollar amount of the total variance is attributed to Enrollment Variance?

8. What dollar effect did the increased admission rate have on cost?

9. The intensity of care delivered dropped from a budgeted case mix of 0.90 to an actual case mix of 0.85. What dollar effect did this have on actual costs?

10. Costs per case increased to $4,900 from a budgeted value of $4,750. This increased actual total costs by what amount?

Use the following data to calculate the variances in problems 1113.

The following information has been prepared for a home health agency:

Budget Actual

Wage Rate per Hour $16.00 $17.00

Fixed Hours 320 320

Variable Hours per Relative

Value Unit (RVU) 1.0 1.1

Relative Value Units (RVUs) 1,000 1,200

Total Labor Hours 1,320 1,640

Labor Costs $21,120 $27,880

Cost per RVU $21.12 $23.23

Budgeted costs at actual volume would be $25,344 ($21.12 1,200), and the total variance to be explained is $2,536 Unfavorable ($27,880 $25,344). Be sure to specify whether the variance is favorable or unfavorable.

11. What is the amount of variance that is attributed to the difference between the budgeted and actual wage rate per hour?

12. What is the amount of variance that is attributed to the change in labor productivity?

13. What is the amount of variance that can be attributed to the difference between budgeted and actual volume?

Use the following information for problems 1416.

The administrator of Appomattox Nursing Home is very aware of needing to keep his cost down since he just negotiated a new arrangement with a large insurance company that will pay him a fixed amount per patient day. Listed below are budgeted and actual expenses for the previous month.

Actual patient days were 30,000 compared to budgeted patient days of 24,000.

	Budgeted Costs @ 24,000 Patient Days	Budgeted Cost Per Unit	Actual Costs @ 30,000 Patient Days
Pharmacy Costs Variable	$100,000	$4.167	$140,000
Misc Supplies Costs Variable	$56,000	$2.333	$67,500
Fixed Overhead Costs	$708,000	$29.50	$780,000
Total	$864,0000	$36.00	$987,500

14. Determine the total variance associated with the planned and actual expenses.

15. Prepare a flexible budget of expense at 30,000 patient days.

16. Determine the Spending Variance which is defined as Actual costs less costs budgeted at actual volume.

Use the following information for problems 1719.

A dermatology clinic expects to contract with an HMO for an estimated 80,000 enrollees. The HMO expects 1 in 4 of its enrolled members to use the dermatology services per month.

At the end of the year, the dermatology clinics business manager looked at her monthly figures and saw that the number of enrolled members had increased by 5% over the budgeted amount, and that 1 in 3 of the total HMO members had used the dermatology services per month.

Actual and budgeted statistics are presented below. The total variance is $70,000 and is unfavorable:

	Budgeted	Actual
Enrollees	80,000	84,000
Usage Rate	0.25	0.3333
Visits	20,000	28,000
Cost	$200,000	$270,000
Cost Per Visit	$10.00	$9.643

17. Determine the enrollment variance for the month.

18. Determine the utilization variance for the month.

19. Determine the efficiency variance for the month.