Problem 8.3 Here are the budgets of Brandon Surgery Center for the most recent h
ID: 2683126 • Letter: P
Question
Problem 8.3
Here are the budgets of Brandon Surgery Center for the most recent historical quarter, in thousands of dollars:
Static FlexibleActual
Number of surgeries 1,200 1,300 1,300
Patient revenue $2,400 $2,600 $2,535
Salary expense1,200 1,300 1,365
Non-salary expense 600 650 585
Profit$ 600 $ 650 $ 585
The center assumes that all revenues and costs are variable and hence tied directly to patient volume.
a. a.Explain how each amount in the flexible budget was calculated. (Hint: Examine the static budget to determine the relationship of each budget line to volume.)
b. b.Determine the variances for each line of the profit and loss statement, both in dollar terms and in percentage terms. (Hint: Each line has a total variance a volume variance, and a management variance.)
c. c. What do the Part b results tell Brandon
Explanation / Answer
a.Flexible budget: Patient revenue = 2 * No. of surgeries $ salary expense =No. of surgeries $ non-salary expense = salary expense /2 =number of surgeries/2 profit = patient revenue - salary expense - non-salary expense. = no . of surgeries/2