You are the manager for We Back You Up, PLC. We Back You Up provides 2 services: creating tailored exercise and stretching plans (treatment plans) to alleviate the causes of patients back pain and then supervising patient exercise therapy sessions. Patients needing medical intervention to address their back pain are referred out.

You are in the process of creating your operating budget for the upcoming year. You have compiled the following data for your budget.

• You expect to perform 1000 back assessments and treatment plans in the next year.
• 50% of the patients are covered by Medicare, 40% are covered by commercial insurance 10% are covered by Medicaid.
• Medicare pays $100 for the back evaluation Commercial insurance pays $125 and Medicaid pays $60
• You expect to perform 3000 exercise sessions.
• 50% of the exercise sessions are covered by Medicare, 40% are covered by commercial insurance 10% are covered by Medicaid.
• Medicare pays $50 per exercise session. Commercial insurance pays $60 and Medicaid pays $25.
• We Back You Ups rent is $3,000 per month
• Utilities are $200 per month
• The exercise sessions are overseen by contract physical therapy technicians who are paid $25 per session
• A physical therapist creates all of the treatment plans and supervises the physical therapy technicians.
• The physical therapist is paid $70,000 per year
• Supplies are $7.50 per assessment/treatment plan created and $2.50 per exercise therapy session.

Flash forwardthe upcoming year that you just created the projected budget for has already come to a close and you are reviewing We Back You Ups books.

You see that the company actually provided 1200 assessments and care plans and 2900 exercise sessions.

Your payer breakout was as expected (same percentages) but Medicare changed their reimbursement rate and actually paid $95 for the care plan and $47.50 for the exercise session. Because of supply chain issues, the price of the supplies used for assessments and developing the treatment plan is $8.00 per assessment and the cost of exercise session supplies was $2.75 for each exercise session. All other assumptions from the projected budget were the same.

What is We Back You Ups Profit Variance? (5 points) Is this a positive or negative (favorable or unfavorable) outcome? (2 points)