Refer to Carroll Clinic's 2012 operating budget, contained in Exhibit 6.2. Instead of the actual results reported in Exhibit 6.3 or listed in Problem 6.3, assume the results:
Carroll Clinic: New 2012 Results
1. Volume (Number of Visits)
Payer A 8,500
Payer B 11,000
Total 19,500
2. Reimbursement (Per Visit)
Payer A $90
Payer B $80
3. Costs
Variable Costs:
Supplies $320,000
Fixed Costs:
Labor $1,050,000
Overhead $550,000
Total $1,600,000
4. Forecasted P&L Statement
Revenues:
Payer A $765,000
Payer B $880,000
Total Rev.$1,645,000
Variable costs$320,000
Fixed costs $1,600,000
Total $1,920,000
Profit ($275,000)
a. What are the profit, revenue and cost variances based on the simple (Exhibit 6.2) budget?
b. Construct Carroll's flexible budget for 2012
c. What are the profit, revenue and cost variances based on the flexible budget?
d. Interpret your results. In particular, focus on the differences between the variance analysis here and the Carroll Clinic illustration presented in the chapter and in Problem 6.3
I really would appreciate assistance on this question.
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Reference to Exhibit 6.2 (page 173) Fundamentals of Healthcare Finance
1. Volume (Number of Visits)
Payer A 9,000
Payer B 12,000
Total 21,000
2. Reimbursement (Per Visit)
Payer A $100
Payer B $90
3. Costs
Variable Costs:
Supplies $315,000
Fixed Costs:
Labor $1,035,000
Overhead $500,000
Total $1,535,000
4. Forecasted P&L Statement
Revenues:
Payer A $900,000
Payer B $1,080,000
Total rev.$1,980,000
Variable costs $315,000
Fixed costs $1,535,000
Total costs $1,850,000
Profit $130,000