Problem 8.3 Here are the budgets of Brandon Surgery Center for the most recent h
ID: 2701505 • 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%u2019s managers about the surgery center%u2019s operations for the quarter?
Explanation / Answer
a. patient revenue is $2 per surgery
salary expense is $1 per surgery
non-salary expense $0.5 per surgery
profit is $0.5 per surgery
b. Flexible Actual variance
patient revenue 2600 2535 65 (favourable)
salary expense 1300 1365 65(adverse)
non-salary expense 650 585 65 (favourable)
Profit 650 585 65 (adverse)
c. part b tell that the profit is adverse and needs to be improved.it gives the indication that variances should be checked ,find out the reasons for deviations, take corrective measures to reduce the deviations