Problem: The administrator of Appomattox Nursing Home is extremely aware of needing to keep his cost down because he just negotiated a new arrangement with a large insurance company which will pay him a fixed amount per patient day. Listed below are budgeted and actual expenses for previous month.
Actual patient days were 30,000 compared to budgeted patient days of 24,000.
1. Find out the total variance associated with planned and actual expenses.
2. Make a flexible budget of expense at 30,000 patient days.
3. Find out the “Spending Variance” which is defined as Actual costs less costs budgeted at actual volume.